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The six features you need in a partnership tax platform

Allocation and tiering technology comparison: PartnerSight vs. others

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In the last five years, there has not been much buzz around allocation and tiering technology, as more general business management software took center stage. That all changed in 2020 with the introduction of PartnerSight, the revolutionary partnership tax technology platform from RSM.

Speed, quality, and transparency top the list of must-haves for finance and tax execs tasked with maximizing their investors’ returns. Whether you are representing a private equity fund, real estate fund, hedge fund, law firm or other partnership, your tax technology options are evolving.

RSM’s partnership tax services team of Michael Polan, Dave Schwartz, John Ihne, and Phil Gaeta—all technology development veterans who have worked with the Big Four—share their experiences with what’s available on the market today and answer the question: Who makes the best allocation and tiering platform? You can check their responses by downloading the scorecard to fill in as you research PartnerSight and the alternatives.

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Who makes allocation and tiering platforms?

Dave Schwartz: The Big Four all have a version of the allocation or tiering platform made six to 12 years ago on technology that is now antiquated and difficult to expand and adapt. RSM is the first middle market provider to offer a platform, PartnerSight, and it was developed in 2020.

Michael Polan: Not much has changed in the last few years on competitors’ platforms. They are limited by the technologies they were built upon. To make updates and to do it right, these providers would have to pivot to modern technological architecture, which would be cost prohibitive. Historically, our competitors’ systems were built to solve a one-off client or industry problem that resulted in several different systems with different capabilities. They do many things, but they have difficulty working together.

Which platforms offer premium allocations capability?

Phil Gaeta: PartnerSight can handle any type of allocations, including break periods, which, in my experience, is unique to PartnerSight. Other than that, it is hard to differentiate on allocation capability alone. All of the options are well vetted and almost ubiquitous. Performance is the main difference.

John Ihne: Because of PartnerSight’s infrastructure, the speed we have here is better, particularly when working with more complex structures.

Which platform offers premium tiering capability?

MP: Every provider has some tiering capability but not a holistic financial services approach. One of the Big Four, for instance, has it for private equity but not for hedge funds. A lot of providers tout that their software is “established” when, in actuality, that failure to evolve your technology creates challenges for you and your clients. 

DS: Some other Big Four tiering data options are also limited to five or so tiers.

JI: PartnerSight can work with as many tiers as you have, and it is still easy to surface data at any point in the review process.

Which platforms provide clients with easier access to data?

MP: RSM made reporting a priority in PartnerSight. At the Big Four, the only priority was allocation and tiering, and most likely no one thought of what the next steps were. Today, you can’t get away with having a technology platform in which reporting isn’t a top priority.

DS: With PartnerSight, you have access to your data on-screen in real time. Typically, with the Big Four, you only get reports out in Excel and you can make changes to those reports. As a client, you don’t know if you can count on those changes actually making it back into the system. With PartnerSight, you can view changes on screen with your engagement team.

MP: RSM’s team has a combined 200 years of experience. We know what clients are asking for and what we as tax people want out of a system, and that’s all built in—we know tax and we know technology.

Which platforms provide centralized data aggregation?

DS: First off, we have to define centralized data aggregation. I think of it as housing a data set where you can do all your work with it. With one of the Big Four platforms, they use a data set to do a calculation, and then that data set is sent over to generate K-1s and you can change it. In this case, that means the data you are delivering can be different than what is in your system.

JI: And that creates issues for version control, and it becomes a quality control issue. You can change one number, but it might not make it to the allocations. At least a couple of the Big Four provide similar centralized data as PartnerSight. What you’re looking for in your platform is a single source of truth.

PG: One platform I’m familiar with stored all the data in one spot, but from there you worked by entity—one entity had one import, another entity had another import, and all reporting was by entity. PartnerSight is unique in that a client’s entire structure is contained in the system and can be reviewed holistically in that way. It's a one-stop shop.

Which platforms integrate easily with your existing technologies?

DS: The ideal situation is a platform that works with your enterprise resource planning (ERP) systems. A new fund or venture in the process of selecting an ERP system could bring RSM in at the beginning stages so we can make sure the tax requirements are satisfied by the accounting requirements.

JI: RSM can easily, in a structured format, ingest data from an ERP system and get it ready for PartnerSight—those ERP data pipes can always be built out. It is not a one-size-fits-all solution; it’s a solution tailored to your needs. All of the service providers are trying to do this, but for Big Four to make it cost effective, they can only do it for the largest clients. We bring it to the smaller clients, too.

MP: Our platform allows us to reach out to fund administrators too, so we can ingest their data and automatically push it along to tax calculators. We can work with your fund administrators to create more value from your data without devaluing your tax team. We are trying to reduce the monotonous manual work and allow our tax experts to shine. That is our guiding vision.

Which platforms have a modern architecture?

JI: Modern architecture needs to be fast, efficient and scalable. No matter who is in the system and what's running in the system, your expectation is it will perform. That’s what you see with PartnerSight. With cloud compute, nothing slows down the calculation engine.

Our competitors’ systems were built with capacity limited by on-site servers rather than a cloud-based information structure. The issue with on-site servers is you pay for them when they are sitting idle, and time is money.

Let's say it is March 31 and everyone is delivering K-1s: When you hit “compute” in PartnerSight, it takes 10 seconds; with a data server sitting in the office, the calculation time will be limited by your purchased computing capacity. You may be sitting staring at that screen while your client waits to deliver those K-1s to their investors. There ends up being a backlog for each of the users across multiple offices as they wait to execute a K-1 package. No one else can compute until your package is complete. This creates a small delay, but multiplied by many users it creates a very inefficient process. You don’t have that in a modern, cloud-based system.

PG: It is the nature of working in tax compliance. People make mistakes— even simple transposition errors—and they go in to fix them and end up making it worse. Those are the types of disasters that inevitably happen at 11 p.m. when people are making changes on a deadline. That type of thing is super easy to fix in PartnerSight where the users have the ability to work with the data, clone it, or revert a dataset without bringing in developers to fix every little mistake.

MP: In alternative architectures, a system fix is anything but easy. It’s like having to buy a new car because you got a flat tire. RSM has a prescriptive innovation model that goes beyond rectifying simple mistakes. We have a larger vision to build in new features regularly—especially the 704(c) and state capabilities—and we are committed to receiving feedback on the process and components all along the way.

JI: The takeaway is: The other systems do a lot but are very rigid and are hard to surface data from the CFO’s perspective.

Which system offers the maximum value?

PG: PartnerSight by a landslide. We have a better platform at a more reasonable price.

DS: The value of an allocation and tiering platform comes from the ease of accessibility and from being able to come in and get your data when you need it without any additional setup time. Other middle market providers don’t have anything like that and are unlikely to because they’re too small. The Big Four can do it for big clients, but it is more difficult and too costly to scale it to smaller clients. RSM is in the sweet spot where we can work with your partnership, large or small, all thanks to PartnerSight.

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