What Is a Portfolio Management System and Why Do You Need One?
A portfolio management system (PMS) is a software solution used by wealth managers or individuals managing their own wealth for modelling and decision support. Naturally, there are various types of such platforms, each tailored to specific purposes. In this article, we explain the functions and benefits of PMS in more detail. We invite you to read on.
What Is a Portfolio Management System?
Portfolio management systems are complex programs used to manage and analyse financial portfolios most efficiently. They are more than just an overview platform—they can be used to perform calculations, benchmark portfolios, model and rebalance them, and even alert wealth managers or notify them about important changes.
Due to the wide variety of features, often going beyond the capabilities of a single human, a portfolio management system has become a must for wealth managers, enabling them not only to become more efficient but also to do their jobs better.
The Two Main Types of Portfolio Management Systems
There are different classifications of portfolio management systems—for instance, depending on the intended user. However, in this case, we will look at the two main types: discretionary PMS and non-discretionary PMS.
Discretionary Portfolio Management System
A discretionary PMS is one in which the portfolio manager is authorised to make investment decisions on behalf of the clients. Therefore, it is fit for those investors who would rather rely on the expertise of professionals.
Non-Discretionary Portfolio Management System
A non-discretionary portfolio management system gives portfolio managers the possibility to select investment options. However, the client can approve or reject them. As such, they are perfect if you work with clients who are looking for a more collaborative approach.
Why Do You Need a Portfolio Management System?
As the title of this article stated, we don’t only want to explain what a portfolio management system is; we want to show you why you should use it. Thus, let’s take a look at the key benefits it offers to portfolio managers.
- Single overview—A portfolio management system is a single source of information regarding a particular client. This makes it much easier to make investment decisions since you work with complete data.
- Analytics, modelling, and simulating—Portfolio management software also enables you to model portfolios, simulate their rebalancing, and calculate the performance. This gives you better insights for future decisions.
- Alerts and notifications—Alerts and notifications help you keep up with changes and react as quickly as possible to emerging opportunities.
- Access from anywhere—Does a portfolio manager in your organisation need to double-check particular information while on their way to the client? With a PMS, they can access the information from their mobile device.
The Takeaway
A portfolio management system is a powerful tool for portfolio managers. Not only does it help them perform their tasks better, but it also impacts the overall customer experience by streamlining communication with clients and giving them a full overview of their investments. Therefore, every wealth management institution should invest in such solutions and take their portfolio management services to the next level.