In our November e-Monitor Report, we reviewed the online tools available to the clients of major brokerage firms - both "self-directed" and traditionally "full-service". Perhaps not surprisingly, the self-directed firms provided better and more robust tools than do their full-service cousins. Indeed, of the eight full-service firms we routinely track, only two provided any asset allocation tool online. Given their advisor-based model, however, this is not surprising, nor should it too negatively reflect on these firms overall offerings.

The tools from Fidelity and Schwab stood out as best in class. They both provide an investor profile questionnaire, recommend a target asset allocation, and allow clients to choose their own targets. Both also provide a thorough analysis of the client's current portfolio and outside holdings, and suggest a model portfolio of mutual funds. Clients can also print a summary report of the analysis. These are all features we have identified as the most important in an asset allocation tool.

Among some of the best practice recommendations we offer in our analysis, firms should consider providing the following options when developing such tools:

Allow analysis of current holdings

Allow clients to also include external holdings

Provide a risk questionnaire to determine a target profile

Allow clients to override suggested target and select their own model

Suggest rebalancing options

If you allow online trading, allow clients to easily act on the tools recommendations by linking to the trading area

Offer email alerts and updates notifying clients when their current allocation deviates from their target

Granted, the above would create a very robust tool and one that firms providing advisor-based relationships may not want to offer. We feel these firms can still provide some light analysis - say comparing your current allocation to a target - and using that information to start a discussion between the client and the advisor. For example, allow the client to email the results directly to their advisor to schedule a phone call or follow up discussion. This gives the client some valuable information and allows the advisor - rather than the website - to remain the focal point of the relationship.

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