Compliance Software Technology Advancements - Not Widely Known In The Financial Industry...Yet

Response sent to Kate McCaffery at advisor.ca, to help clarify some of Kate's information in her article published in January, 2006.

Kate:

Great article: Asset allocation software: The next generation. We’re glad to see other competitors are finally starting to enter the arena. I think it helps validate what we’ve been saying to advisors and dealers for some time. However, I wanted to bring to your attention that this type of software is not exactly ‘the next generation.’ In fact, PureLogix Corp. has been marketing OASIS for the last year and a half to independent advisors across Canada, and have signed deals with advisors from 9 Canadian dealers (5 of them are national). We’re hoping you might consider doing a follow-up article to clarify that neither Equisoft nor Quantum are first to create such a products, but rather are continuing in a direction PureLogix Corp. started some time ago. We would also like to point out that the ‘next generation’ of software will likely be following in the footsteps of new software we have also already developed and are currently leasing. We believe the ‘next step’ in asset allocation software should directly connect the sales process with the dealer compliance department ensuring investors understand ‘risk’ in their investments the same way the compliance officer does.

Not only does OASIS already link with RPM, Winfund and Univeris, we also import client data from Dataphile and IBM MIPS as well. We currently support corporate deals but we started our business with, and we continue to support individual advisors regardless of what dealership they work with.

Since OASIS is completely web driven, any machine connected to the Internet will allow an advisor (and the entire admin team) to log into OASIS to work within the various modules simultaneously. Also, because we program Web 2.0 applications which use advanced AJAX technology (asynchronous javascript and XML), an extremely fast server response is executed making the user experience very similar to desktop applications. There is no need for advisors to update any price data. The universe of Canadian mutual funds, seg funds, the universe of North American stocks and the universe of American mutual funds are updated for the advisor daily. All electronic rebalancing is also completed every day, automatically, with no required input from the advisor.

OASIS is North America’s first EIM (Electronic Investment Management) process. Rather than focusing on only a couple of areas an advisor might have to work in, our platform allows advisors to run through the entire investment management process electronically. With OASIS advisors can:

Complete an artificially intelligent risk tolerance questionnaire with clients
Run through basic financial planning calculations to help determine long-term financial goals
Enter and save an unlimited number of model portfolios
Calculate correlation matrixes using daily data (the only firm in Canada we’re aware of going to this effort)
Historically back-test all model portfolio on actual daily historical data (adjusted for distributions automatically) – this allows advisors to tailor rebalance tolerances for each individual security in the model portfolio if desired.
Create a side-by-side risk/return analysis proposal, ready to present to the investor – all completed by the advisor with a point-and-click interface
Complete an investment policy statement in seconds
Complete all applications and transfers (including dealer specific paperwork) electronically in adobe format. Because all client data is imported into OASIS, there is no need to look up client information, account numbers, or unit or dollar balances. Even fund codes are automatically looked up by OASIS when advisors are trying to fill out trade tickets.
OASIS can calculate the cheapest and fastest way to move an old portfolio to a new one without charging the client any DSC charges
Lastly, not only does OASIS track every client portfolio daily against its personal benchmark portfolio to find rebalancing opportunities for the advisor, OASIS also powers Internet accessible statements so investors can view detailed analysis on their personal accounts. Multiple accounts can also be grouped together to analyze multiple accounts simultaneously.

When building portfolios, your article mentioned Equisoft’s solution uses asset classes and Quantum uses indexes. OASIS can rebalance using asset classes (mainly used by sector rotator advisors), but primarily, OASIS rebalances using individual mutual fund holdings. Why do we do this? Using the same logic as Chabot, although indexes are less vague than asset classes, doing analysis on the actual securities an advisor plans to sell to investors is less vague than either the index or asset class solutions your article mentioned. Obviously the processing power necessary to create models using individual securities is a lot larger, but we think the results are well worth the effort for out clients.

We feel the real ‘next generation’ of asset allocation software is what we are doing with our newest software release called Compliance Net. We designed Compliance Net to analyze every on-book account at a dealership, every day! Compliance Net scans for:

· Unsuitable recommendations using both Prudent Person and Prudent Investor Rules
· Stale-dated ‘Know Your Client’ data
· Over-concentration in a single security
· Accumulation of a single security in multiple client accounts
· Unauthorized trades in pro accounts
· Unauthorized trades placed in restricted accounts
· Churning in client accounts
· Unilateral mutual fund substitutions (IDA by-law 29.1a dn Regulation 200.1 (h))
· Listed Persons under U.N. Suppression of Terrorism Regulations (IDA Notices MR102, MR105)
· Accounts held in non-cooperative countries and territories (NCCT list) as determined by the Financial Action Task Force on money laundering

We have linked Compliance Net to OASIS, so now compliance departments have a direct link to advisors in the field. Advisors can now log into OASIS, complete a risk questionnaire with a client or prospect, select the portfolio that matches the client’s needs, and OASIS will then suggest how the advisor should complete the risk tolerance on the dealer know your client forms. This ensures that the investor, advisor and compliance department all have the same assessment of risk, substantially reducing the likelihood of misinterpretation by the investor.

I’ve attached marketing materials on Compliance Net and OASIS if you would like to review any of the software features in more detail. I would also welcome you to take a look at the live software demo over the Internet. If interested, feel free to call or email to book an appointment.

Thank you in advance for your time Kate. If you’re interested in a follow-up article, would you please let us know if we can be of assistance?

Sincerely,


Edward Iftody, BA, CIM
President
PureLogix Corp.