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Managed Accounts Service

Managed Accounts Service. David H. Gardner and Brett Ginter The Depository Trust & Clearing Corporation October 17, 2006. The Bank Depository User Group 2006 Annual Meeting. Managed Accounts Service. Separately Managed Accounts Defined.

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Managed Accounts Service

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  1. Managed Accounts Service

  2. David H. Gardner and Brett GinterThe Depository Trust & Clearing Corporation October 17, 2006 The Bank Depository User Group2006 Annual Meeting Managed Accounts Service

  3. Separately Managed Accounts Defined • A portfolio of individually owned securities managed on behalf of a client • Investment Managers tailor account based on individual client needs restrictions and tax sensitivities • Single all inclusive wrap fee • Sponsors-Managers-Service Providers • Types of accounts: SMA, MSP, MDP, UMA, UMH

  4. Why Managed Accounts? • Managed Accounts are the fastest growing product in the financial services industry- 15%-25% • Between 1992 and 2003 private banks’ portion of the overall wealth market plummeted from 62% to 24% • 5 Wirehouse sponsors hold 80% of MA AUM with Banks having less than 8% market share • 70% of Banks surveyed this year are employing “open architecture” between internal and external offerings (3rd party) • Your conflict is in your culture and bureaucracies not your infrastructure • Portfolio construction and performance is no longer a simple allocation strategy of stocks-bonds-cash • In 2Q of this year, a Bank was listed in the top 3 firms for SMA asset growth

  5. Why Did We Build This Service? • We were asked to. Industry leaders and the MMI recognize data standards, consistent processes and centralized connectivity are vital to support continued industry growth. A bigger piece of a $12 trillion pie • Current environment is inefficient, costly to operate, error prone. It became a one to many environment preventing an efficient many to many environment • Participants don’t speak the same language or use similar processes, so it’s not scalable • High risk operations rely on email/fax/paperwork, so it lacks customer data integrity and security • To reduce the barriers to entry for consumer choice and sponsor offerings • Leverages DTCC infrastructure and secure network to create seamless communications and straight-through processing of these complex accounts

  6. MAS – Under the Hood • Centralized Communications HUB: one to many • Open Architecture & XML Compliant • Utilizes MMI 2.0 Standard Data Messaging • Provides Standard Platform for Account Set-up & Reporting • Conduit for Account Messages Between All Participants • Sponsors Save Money by Eliminating Redundant Systems to Support Third Party Investment Manager Communications • Increases Operational Efficiencies • Reduces Error Risk

  7. What is a Data Standard?(Disparate processes to a standard format) New Account Set-Up and its data elements

  8. Standard Messages – Phased Release Account Setup Message $7.50 Release 1 7 Messages Other Messages $5.00 Release 2 10 Messages Release 3 6 Messages

  9. Current State: Redundant Many to Many Operating Redundancy $$ Processing Risk $$ Non-secure non-scalable network

  10. Future State with DTCC MAS Using MMI 2.0 Standards Internal Investment Manager DTCC MAS Bank Sponsor 2.0 2.0 New Account ProfileReceived New Account Profile SENT Audit Routing Entitlement Validation Other 3rd party Investment Managers - N Ok to use? MMI 2.0 Used ? Where to go ? Trail and Time

  11. How do you get from where you are to MAS? • Outsource (TAMP) or Not • Front End Changes vs Translation Layer • Batch vs Intraday Batch vs Message Based • Institutional vs SMA processing • Operational Effectiveness • Enterprise Initiatives • Messaging • Workflow • Security • Connectivity • Etc…

  12. Internal Investment Manager DTCC/Citigroup Approach DTCC MAS Smith Barney GTS Translator Routing Entitlement Validation Audit Other 3rd party Investment Managers - N

  13. Bank Sponsor Bank Sponsor Bank Sponsor DTCC MAS Application Provider 1 Application Provider 2 Adapters Routing Entitlement Audit Validation Outsourced (TAMP) Model – Sponsor Internal Investment Manager Outsourcer (TAMP) Other 3rd party Investment Managers - N

  14. Investment Manager 1 Application Providers Outsourcer Investment Manager N Outsourced Model – Investment Manager DTCC MAS Adapters Investment Manager 2 Sponsor Routing Entitlement Audit Validation

  15. First Steps Current State Future State High Level Release Develop High Level Release Plan Data Gathering & Current State Develop Future State 3-4 weeks 3-4 weeks 2-4 weeks • Develop Client Current State • Complete Data Gathering Session • Compile Business Requirements • Compile Functional Requirements • Develop DTCC Current State • Develop Future End State • Develop Release Plan • Complete Interim End States

  16. First Steps

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