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Neal Frankle
Neal Frankle
The World of Rebalancing Software

How to conquer and reign.

March 19, 2009
by Neal Frankle, CFP

If you are a wealth manager, one of your responsibilities is to rebalance your clients' portfolios on a timely basis. This is a hugely important task but one that can be either very difficult or expensive. I'd like to tell you how I solved those two problems.

When I first looked into rebalancing software I was scared and depressed. The major vendors were big-time expensive, slow, had huge annual licensing fees and the products were hard to master. I had almost given up on the whole idea when the thought of hiring a computer nerd to write a simple program came to me.

Portfolio Center

I started using Portfolio Center so the job was a little easier. Portfolio Center creates a global rebalancing report once you input the models you want. The only problem with the Portfolio Center product was that it didn't allow me to filter out funds that were held less than 90 days and it didn't allow me to do any customization whatsoever. What if one of my clients held IBM or Apple and didn't want to sell? What if my client needed more cash to be held in the account than the model called for?

PC Nerd to the Rescue

Working with my own personal computer nerd, we developed a simple program that takes the Portfolio Center report, an Excel® spreadsheet (that lists the accounts and the positions that I don't want to trade) and a 90-day history of all the funds I've purchased by account over the last 90 days. With that information, the rebalance tool that my nerd gave birth to creates a nice little spreadsheet that I can simply download into TD Ameritrade.

My total cost was under $3,700 — and I don't have to pay any annual licensing fees. As an added bonus, the entire development time was under three weeks.

Conclusion

My advice to you is to find a smart and reliable nerd — but don't call him that. Spell out exactly what you want and get going. Even if you don't own Portfolio Center, there is no reason why a good programmer can't build you an interface directly from your custodian.

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Neal Frankle, CFP, is the author of Why Smart People Lose a Fortune: 5 Steps to Restoring Your Wealth and Sanity. He helps affluent clients establish and implement a safety-net strategy to protect their wealth. He also helps other professionals, such as CPAs, do the same for their clients. If you would like to receive updates on other topics of interest to you and your clients, please register for my free e-mail newsletter here.

The material in this article is general information and not meant to provide specific investment, tax or legal advice. Investing in the stock market involves risk.