A small info company may help change the face of wealth management. As much as any investor-education alliance, strategic consultancy or fee-only
advisory out there, Private Client
Resources may be one of the most significant
change agents on the wealth-management scene today. By providing up-to-date
performance reporting across all asset types, the database publisher gives
clients an accurate picture of their wealth. This radical transparency also
helps advisors manage their clients' wealth to target. Bigger still, as PCR
grows, it will be able to give advisory firms an objective measure of the value
of their advice in a rationalized high-wealth marketplace.

As matters stand, firms fighting for wallet share in the $25-million-plus
bracket have little to entice prospects other than attractive-sounding bromides.
Old firms talk of their "unparalleled experience" or their ability to
"understand the complex challenges and opportunities" their clients face. New
firms boast of being good at listening, replicating their clients' "values" or
providing the kind of slick service "experience" that aging yuppies supposedly
crave.

Crazy assets

But such claims meant little to PCR president and co-founder Christopher
Snyder, when, in the mid 1990s, he went from being well-off to very wealthy
after selling Loan Pricing
Corporation, a firm he founded about a decade
earlier, to Reuters.

"Suddenly I had all these crazy assets to manage and no one to help me
understand how I was doing," says Snyder, an economist and statistician by
training.

The first thing Snyder wanted to know was how, as a group, his high-wealth
peers allocated their assets. But he discovered that no one tracked those data.
More fundamentally, he found that none of the advisory firms he contacted could
help him answer the three questions he considers vital to effective wealth
management: Where am I now? How am I doing? What are my risks?

"These are questions CEOs ask about the companies they run," says Snyder. And
for private clients to get answers to such questions, he felt they should have
access to a management-information system (MIS) similar to those many CEOs use
to get reports on their companies' performance. The personal-wealth reports
should give clients customized updates on their performance, including
breakdowns across asset classes and liability types and support rigorous
analysis of the data.

Snyder took his idea to former McGraw
Hill CEO Joseph Dionne, and the
two set about raising capital for PCR, a company that would build an MIS
"dashboard" for ultra-wealthy clients and their advisors. The Wilton,
Conn.-based company's 40 or so investors include former Goldman
Sachs CIO Robert A. Friedman,
former Chemical Bank president Thomas Johnson, Portfolio Management
Data founder Steven Miller and
Rockefeller
Foundation chairman James Orr III.

About five years ago, with its founders and investors as guinea pigs, Snyder
and Dionne got to work on PCR Insight, a private-client version of a corporate
MIS. "It's like Quicken for high-net-worth individuals,"
PCR says in a recent press release. "For the first time ever, an individual or
family worth, for example, $120 million can receive an updated report on a daily
basis."

Complexity units

Intuit's Quicken may be apt comparison
for PCR Insight, but it's still worth the trouble of registering for a demo to get a closer look. It gives
wealth owners and their advisors the ability to see assets and liabilities in
overview or to drill all the way down to single holdings. Securities can be
categorized by type, manager, style or tax status. The report includes
trust-held assets as well as alternatives like hedge funds, limited partnerships
- which these days account for a good 40% of a high-wealth investor's portfolio,
according to PCR - and personal-use assets like homes, marinas and fine art.

Advisors using PCR Insight can see their clients' holdings by "super
household" - PCR's term for a client - "households" within each super household
and "taxable entities" within or household. In turn, an advisory firm's
management can use PCR Insight to see how individual advisors are faring with
their clients.

PCR charges for Insight on the basis of complexity of assets rather than size
of assets. It assign WCUs or "wealth complexity units" to each asset class - a
lower number for, say, equities, higher numbers for a hedge fund or a collection
of vintage cars - based on the comparative difficulty of pricing it. PCR assigns
WCUs to each taxable entity in a superhousehold and tallies them all up to
arrive at a price for its services.

Roy Smith, a professor at the University of New
York's Stern School of
Business, a former president of Goldman
Sachs International, and one of PCR's investors, says PCR Insight "enables
you to collect, categorize and display in one place all the information about
your holdings." Armed with that data, Smith - a decidedly self-directed investor
- says he can "look at and manage" his overall asset allocation and risk
exposure. Before he had access to PCR Insight, Smith says he was able to get a
fair overview of his wealth, but it was a drawn-out process made more vexing by
"all the little errors I'd make. Now I get a clear picture, all displayed for me
on a dashboard."

Sharon Sellstrom, who runs a single-family office on the West Coast
that just became a PCR client, calls PCR a "cost-effective alternative to a
master custodian" that "provides pristine data."

Steam cleaners

Snyder also sees the reliability of PCR's data as Insight's chief selling
point. "We're like Loan Pricing Corporation, Standard &
Poor's, Moody's or FW
Dodge," he says. "That's the world we
come from." But Snyder adds that claiming kinship with such well-known and
respected information providers calls for rigorous normalization processes to
eliminate errors as well as semantic and structural inconsistencies in the data
PCR works with. "We're steam clean the data," he says. "And our standards for
that are very high."

Jamie Punishill a Cambridge, Mass.-based analyst with Capgemini, a consultancy, says PCR irons out
problems that can crop up when one data source - a brokerage, say - writes IBM as "IBM," another source calls it
"Int'l Business Machines" and still a third designates it with its CUSIP number. Without normalization
those different inputs could result in separate entries for each holding. Writ
large, that makes for a fuzzy picture of a high-wealth family's holdings.

Although providing trustworthy performance data is PCR's mainstay, Jon
Carroll of Family Office
Metrics, a New York-based consultancy to
ultra-high-wealth families, has also heard complimentary things about the firm's
service ethic. "People who are working with them say they're very diligent about
customer service," he says. "It's more a service company than a software or
technology company."

Still, adds Carroll, PCR Insight might be more attractive to family offices
if it linked directly with general-ledger software. But Mallon
Fitzpatrick, PCR's manager of business development, says the linkage Carroll
calls for is only a few mouse clicks away. "We're not a general ledger, but we
have the data to populate one," he says. "And you can do that by putting our
data on a spreadsheet and uploading it."

PCR recently signed up Northern Trust , its biggest client
so far. Not counting investors, its other clients are "20 or so family offices
and four or five boutiques" including Ardmore, Pa.-based Hillview Capital
Advisors, according to Snyder. Right now
the firm tracks about $5.5 billion in assets, though PCR expects to see that
number jump once it starts processing Northern's clients' data.

Rationalizing

As that number grows, says Snyder, PCR's High Wealth Data Set kicks in. And
that, as much as Insight, is what makes PCR a potential force for change in the
wealth arena. The High Wealth Data Set boils down to a financial map of the
ultra-wealthy landscape.

For instance PCR's preliminary studies suggest that the very wealthy do - as
some may suppose - outperform market averages. Another early insight - useful
perhaps to advisors thinking of targeting particular professions - is that
people who have made their fortunes in the arts and media and corporate tend to
fork out more for services than others in their wealth bracket; entrepreneurs,
on the other hand, are a bit on the stingy side.

By facilitating peer benchmarking PCR's High Wealth Data Set could give
clients a way to judge the value they derive from their advisors, just as it
could give advisory firms something other than claims to venerability or novelty
to woo high-end clients.

Over time, and as statistical tools like PCR's data set shed light on the
high-wealth market, successful firms may be able to charge more for their
services even as their share of market increases. Meanwhile less successful or
marginal firms may have to lower their prices, look down the wealth scale for
less complex wealth to manage, or leave the business entirely. -FWR

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