Provident Technology
From time to time, I like to update clients as to what is happening behind the scenes here at Provident. We’ve made a number of technology changes over the past year or so, and you might find it interesting to learn how things gradually evolve here. We are not “early adopters” of technology. We tend to wait a bit and let others work out the kinks on brand new offerings.
The impetus for this piece is an important change to our client accounting system. After almost 22 years with PortfolioCenter, we are switching to Tamarac Reporting. PortfolioCenter was a reliable software package, but began to show its age in recent years as owner Charles Schwab Corp. seemed to stop investing in it.
About two years ago, Schwab sold the PortfolioCenter business to Envestnet/Tamarac, a publicly-traded software company focused on the investment industry. The buyer had been using PortfolioCenter as the backbone of its own online portfolio accounting software, and was the logical buyer when Schwab wanted to exit that business.
PortfolioCenter worked well when we were required to work from home this spring, but it has been in the back of my mind for several years that this key function is highly dependent on access to our office and personnel. We have almost a decade of experience with another Tamarac offering, and continuing in the Tamarac family seemed less risky than starting a new vendor relationship. We also suspect that Envestnet will ultimately “sunset” PortfolioCenter, meaning we’d eventually have to switch to the more modern method of maintaining software online rather than on our own server. One of my philosophies is that I’d rather choose the time of a change rather than have fate choose for me.
The data conversion to Tamarac went much more smoothly than the move to PortfolioCenter 22 years ago when it took about a week for an outside firm to convert the data and ship it back to us. We are now in the next phase of the process—learning to work with Tamarac Reporting. It is our intention to run our client data in parallel—on both PortfolioCenter and online through Tamarac—and compare data over a three-month period. You may see your next quarterly report in a different font and somewhat different look than what you are accustomed to. It is also possible that we may make other changes to the look and feel of our reports once we become acclimated to the robust Tamarac offering.
The other software we’ve been using from Envestnet for about a decade is known as “Tamarac Trading,” but we’ve always just called it “Tamarac.” Every morning our computer receives data from Fidelity on every client account and transaction. Going forward, this will be received by Tamarac Reporting. The data is then fed into Tamarac Trading. We use Tamarac Trading to model our trading plans. We store additional data such as client asset mix, liquidity needs, and any restrictions. Tamarac takes all the data and calculates how to complete transactions. We then approve, deny, or amend the proposed transactions. Tamarac sums up the total number of shares approved and gives us a clean “allocation” of the trade.
At one time, a fairly simple trade (like buying a new stock) could take three people one day each. Now, it has typically been reduced to half a day for one person. Reducing the time spent on what I call “the mechanics of trading” frees up additional time for more valuable endeavors like researching and monitoring your investments. Tamarac Trading also fosters greater consistency between client portfolios, helping reduce unintentional deviations from our strategy. When the market fell an “unprecedented” degree in February and March, we responded with an “unprecedented” flurry of trading activity to take advantage of the new opportunities the market provided us; we wouldn’t have been able to implement our plans as quickly and evenly without Tamarac Trading.
About two years ago, we switched our research platform to Capital IQ from a range of different products we had been purchasing. “Cap IQ” is a service of S&P Global, a company widely owned by our clients. We began exploring Cap IQ not with the intent of moving to the platform, but as due-diligence on the stock—to learn how the company sells a product that is a small part of a big company.
Cap IQ offers a treasure-trove of data on pretty much any public company anywhere in the world, and some private companies too. We can conduct more effective screens for companies meeting certain criteria, which is frequently how we uncover new stocks to research. This might seem like a fairly basic function, but a lot of the free data out there contains errors. And the number of data fields available on Cap IQ is immense and detailed. Transcripts of conference calls from any company on our watch list are emailed directly to us, faster than the previous service we used.
The data reported by Cap IQ is taken from source documents and an imbedded link on our screen takes us directly to the original data location on that source document. Data can be downloaded in spreadsheet form for custom work and calculations we might want to perform. Plus, our entire staff has access to Cap IQ rather than having to maintain separate subscriptions. Like our Envestnet/Tamarac products, we use Cap IQ “in the cloud,” meaning that we can access it anywhere.
We also continue to update our office functionality and information security. Our local IT partner was instrumental in helping us set up our workflow for remote work in March as it became increasingly likely the pandemic would result in restrictions. Our tech provider helped us all access our office network remotely, something a few employees were already doing from time to time. We use two-factor authentication that beams a code to our wireless phones to verify the identity of the user attempting access. They also helped us activate an app that came with our phone system to enable wireless phones to receive and make calls through our office phone number even when we are off premises. Phones were answered and calls transferred just as if we were physically in the office. We never needed to use it before, but it certainly came in handy during the shutdown.
And while I’m on the subject of security enhancements, about a year and a half ago we adopted Sharefile from Citrix, a large and reputable company. We securely move sensitive documents by uploading them to the Sharefile website, emailing clients with a link to retrieve them. This bypasses electronic inspection practiced by many email providers. For further security, we password-protect the files. Documents protected this way include account applications containing Social Security numbers and birthdates, and instructions to link your managed account to your bank.
My goal in writing this piece is to update clients on the many important details that take place behind the scenes here at Provident. I also hope you will be impressed that we aren’t just resting on our laurels. We are forward-thinking, but also cautious. That’s the definition of “provident”—planning carefully for the future.
Scott D. Horsburgh, CFA