Technology challenges of supporting managed accounts
Download
1 / 64

Technology Challenges of Supporting Managed Accounts - PowerPoint PPT Presentation


  • 106 Views
  • Uploaded on

Technology Challenges of Supporting Managed Accounts. Vincent Manning Venture Financial Systems Group, LTD. Why Are We Here?. Separately managed accounts (SMA) held $399 billion in assets at the end of 2002 (Source: The Money Management Institute).

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' Technology Challenges of Supporting Managed Accounts' - elsie


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Technology challenges of supporting managed accounts

Technology Challenges of Supporting Managed Accounts

Vincent Manning

Venture Financial Systems Group, LTD.

2003 NICSA Technology Forum


Why are we here
Why Are We Here?

  • Separately managed accounts (SMA) held $399 billion in assets at the end of 2002

    (Source: The Money Management Institute).

  • SMA assets are expected to increase to $1 trillion by 2006 and $2 trillion by 2011

    (Source: Financial Research Corp – “FRC”).

  • More investors will turn to managed accounts over the next five years, cutting the ratio of mutual funds to managed accounts in half

    FRC).

2003 NICSA Technology Forum


Why are we here1
Why Are We Here?

  • Growth in SMAs driven by the attractiveness of individually customized, professionally managed products.

    • Tax efficient

    • Decreased investment minimums

2003 NICSA Technology Forum


Why are we here2
Why Are We Here?

  • Current technical and operational landscape is void of industry standards.

    • Analogous to mutual fund industry in the early 1980s.

    • Until recently, industry power has been concentrated in the hands of a few sponsors and systems providers.

2003 NICSA Technology Forum


Agenda
Agenda

  • Introductions

  • Industry Primer

  • Managed Asset Market Place

  • In-House Servicing

  • Outsourcing as an Option

  • Developing a Multi-Manager Strategy

  • Q&A

2003 NICSA Technology Forum


Panelists
Panelists

Roger Gregory

DST International

Chris Flynn

MFS Investment Management

Dave Reinhart

The Bank of New York Separate Account Services

Donald Foberg

Phoenix Investment Partners

2003 NICSA Technology Forum


The players
The Players

  • Wirehouses/Sponsors

    • Top 5 control over 70% of the assets(FRC)

  • Investment Managers

    • Top 10 control 35% of AUM(FRC).

  • Technology Platform

    • CheckFree APL, IDS, Advent, DST, FIN

  • Customization Tools

    • LifeHarbor, SoftPak, Upstream, Parametric, Placemark, Tamarac, Smartleaf, BTA

  • Outsource Providers

    • BONY, Mellon, State Street

2003 NICSA Technology Forum


The problem technical and operationally inefficient marketplace

Program #5

Program #1

Program #6

Program #2

Program #7

Program #3

Program #8

Program #4

The Problem: Technical and Operationally Inefficient Marketplace

I

N

T

E

R

F

A

C

E

Model A

Model B

Operations

Team

Portfolio Manager

Model C

Logon

Logon

Model D

Logon

Logon

Source: Cerulli Associates

2003 NICSA Technology Forum


The problem technical and operationally inefficient marketplace1

IM

IM

IM

IM

IM

Sponsor

Sponsor

Sponsor

Sponsor

Sponsor

Sponsor

Sponsor

FC

FC

FC

FC

FC

FCC

FC

FC

FC

FC

C = Custodian

C

C

C

C

C

Fax

E-mail

Proprietary Link

The Problem: Technical and Operationally Inefficient Marketplace

2003 NICSA Technology Forum


The problem technical and operationally inefficient marketplace2
The Problem: Technical and Operationally Inefficient Marketplace

  • Lack of standardization among sponsor systems presents significant operational hurdles and technical challenges.

    • Majority of major sponsors maintain proprietary portfolio accounting and trading systems.

    • No standard technology protocols or workflow processes across sponsor systems making it difficult to standardize operations across multiple sponsors.

    • Operational complexity increases dramatically as the number of sponsor connections increases.

2003 NICSA Technology Forum


The problem technical and operationally inefficient marketplace3
The Problem: MarketplaceTechnical and Operationally Inefficient Marketplace

  • Operational segmentation in the marketplace due to disparate applications will continue to place tremendous strains on operations.

2003 NICSA Technology Forum


Potential solution industry utility
Potential Solution: Industry Utility Marketplace

  • In a November 2002 white paper, The Money Management Institute (MMI) called for the creation of an industry utility to transmit critical communications between industry participants.

2003 NICSA Technology Forum


The Result: Technical and Operationally Efficient Marketplace

Industry Standards

2003 NICSA Technology Forum


The reality we are not there yet
The Reality: We Are Not There Yet Marketplace

  • The Money Management Institute is working to bring standards to the industry.

  • DTCC is working to bring standards to new account openings process.

  • New market participants offer expanded solutions along with pressure to standardize communications.

2003 NICSA Technology Forum


Ideal Operating System Marketplace

  • Communications

    • Seamless, secure electronic connectivity between all parties.

    • Standardized electronic communications for all routine operational tasks.

  • Operations

    • Real time transaction fulfillment.

    • Easy to use and train.

Source: The Money Management Institute

2003 NICSA Technology Forum


Ideal Operating System Marketplace

  • Infrastructure

    • Internet-like disaster survivability.

    • Exponential scalability.

    • Open architecture.

    • Low cost.

    • Upgradeable.

    • Managed and owned by industry participants.

Source: The Money Management Institute

2003 NICSA Technology Forum


Managed asset market place the players the core functions the tools
Managed Asset Market Place MarketplaceThe Players, The Core Functions, The Tools

Roger Gregory

DST International

2003 NICSA Technology Forum


Managed assets the players
Managed Assets: The Players Marketplace

  • Wirehouse

  • Sponsor

  • Product Provider

  • Hybrid

  • Supermarket

  • TAMP

“the future ain’t what it used to be”

Yogi Berra

2003 NICSA Technology Forum


Managed assets the players1
Managed Assets: The Players Marketplace

  • Wirehouse

  • Sponsor

  • Product Provider

  • Hybrid

  • Supermarket

  • TAMP

  • Old-line large brokerage firms

2003 NICSA Technology Forum


Managed assets the players2
Managed Assets: The Players Marketplace

  • Wirehouse

  • Sponsor

  • Product Provider

  • Hybrid

  • Supermarket

  • TAMP

  • Wirehouses, firms distributing SMAs

2003 NICSA Technology Forum


Managed assets the players3
Managed Assets: The Players Marketplace

  • Wirehouse

  • Sponsor

  • Product Provider

  • Hybrid

  • Supermarket

  • TAMP

  • Asset managers, proprietary or outsourced

2003 NICSA Technology Forum


Managed assets the players4
Managed Assets: The Players Marketplace

  • Wirehouse

  • Sponsor

  • Product Provider

  • Hybrid

  • Supermarket

  • TAMP

  • Overlay managers, brand aggregators/consolidators

2003 NICSA Technology Forum


Managed assets the players5
Managed Assets: The Players Marketplace

  • Wirehouse

  • Sponsor

  • Product Provider

  • Hybrid

  • Supermarket

  • TAMP

  • Originally mutual fund distribution,

  • now expanding product offerings

2003 NICSA Technology Forum


Managed assets the players6
Managed Assets: The Players Marketplace

  • Wirehouse

  • Sponsor

  • Product Provider

  • Hybrid

  • Supermarket

  • TAMP

  • Turnkey asset management program

2003 NICSA Technology Forum


Managed assets core functions
Managed Assets: Core Functions Marketplace

  • Distribution Channel

  • Financial Planning

  • Product Offerings

  • Trade Execution

  • Custody

  • Product Provider

“if the world were perfect, it wouldn’t be”

Yogi Berra

2003 NICSA Technology Forum


Managed assets core functions1
Managed Assets: Core Functions Marketplace

  • Distribution Channel

  • Banking

  • Insurance

  • Wirehouse

  • Regional brokers

  • Mutual Fund Complex

2003 NICSA Technology Forum


Managed assets core functions2
Managed Assets: Core Functions Marketplace

  • Risk profiling

  • Asset allocation

  • Product selection

  • On-going monitoring

  • Financial Planning

2003 NICSA Technology Forum


Managed assets core functions3
Managed Assets: Core Functions Marketplace

  • Product Offerings

  • Mutual Fund SMA

  • Annuities

  • SMAs

  • Self Directed Brokerage

2003 NICSA Technology Forum


Managed assets core functions4
Managed Assets: Core Functions Marketplace

  • Trade Execution

  • Mutual fund

  • Equity

  • Fixed Income

  • Custody

  • Fully Disclosed/Omnibus

  • Self Clearing

  • Trust

2003 NICSA Technology Forum


Managed assets core functions5
Managed Assets: Core Functions Marketplace

  • Product Provider

  • Mutual Funds

  • Pensions/Institutional

  • Fund Wraps

  • SMAs

  • Hedge Funds

2003 NICSA Technology Forum


Managed assets the tools
Managed Assets: The Tools Marketplace

“you can observe a lot by watching”

Yogi Berra

  • Advisor Tool Kit

  • Interfaces

  • Decision Support

  • Order Management

  • Compliance

  • Trading Links

  • Back Office Processing

  • Reconciliation/Synchronization

  • Performance Measurement

  • Reporting

2003 NICSA Technology Forum


Managed assets dst solutions
Managed Assets: DST Solutions Marketplace

“The towels were so thick there I could hardly close my suitcase.”

Yogi Berra

  • OpenPFA

    • Focused on firms with distribution channels

  • MAP

    • Focused on product providers

  • DataCenter Processing

    • ASP

  • SS Message Hub

    • Message based interfacing, trading links

2003 NICSA Technology Forum


In-House Servicing of Managed Accounts Marketplace

Chris Flynn

MFS Investment Management

2003 NICSA Technology Forum


Discussion Topics Marketplace

  • MFS’ Operational Model – Successes and Challenges

  • Value Added Technology

  • Highlighting:

  • LifeHarbor

DST – Automated Work Distributor

2003 NICSA Technology Forum


Operational service models
Operational Service Models Marketplace

Internal Servicing vs. Outsourcing

  • MFS’ Operational Model – Internal Servicing

  • 27 employees dedicated to operations for 15,000+ accounts

    New account setup, reconciliation , trading and support services

  • Cross Trained Staff – produces program experts

  • Managed account platform fully integrated to all systems

    through out the firm – trading, sales, back-end compliance

  • Operational support perceived as critical attribute to success

2003 NICSA Technology Forum


Advantages

Internal Servicing Marketplace

Get to know your client

Ability to employ talent

Timely problem resolution

Can develop metrics to prepare for growth

Ability to design customized workflow

Outsourcing

Potential cost savings

Eliminate training costs and concerns

Financial risks due to operational errors are outsourced to third party

Advantages

2003 NICSA Technology Forum


Disadvantages

Internal Servicing Marketplace

Could be costly: people, technology, infrastructure

Outsourcing

Potential to lose control of effective client servicing

Can lose ability to implement value added technology as needed

Place all operational matters in the hands of a third party provider – reputation at stake

Disadvantages

2003 NICSA Technology Forum


Value Added Technology Marketplace

Trading and Account Monitoring Technologies

  • Lifeharbor

  • Ease in Account Monitoring

    Heat mapping and grouping of accounts for timely

    account monitoring and rebalancing

  • Enhanced Trading Capabilities

    Tax Aware, Compliance Module

  • Risk Mitigation Management

    Enhanced User Security, Activity Auditing

2003 NICSA Technology Forum


Value Added Technology Marketplace

Workflow and Imaging Technologies

  • Automated Work Distributor (DST product)

  • Document Scanning

    On site storage reduction, Easily obtain documents linked by account number

  • Work Routing Through Queues

    Workflow designed to move account from opening to trading as well as maintenance

  • Holdover Analysis

    Ensures that items left in queues are moving through workflow timely

2003 NICSA Technology Forum


Separate Account Services – Outsourcing as an Option Marketplace

Dave Reinhart

The Bank Of New York

2003 NICSA Technology Forum


Separately managed accounts market today

Effects of Bear Market Marketplace

Net Redemptions

Accounts Smaller

Sponsors Cutting Manager Fees

Bear Market vs. Bull Market

Pressure to Reduce Expenses

Operations

Technology Expenditures

Separately Managed Accounts Market Today

2003 NICSA Technology Forum


Technical and operational challenges for sma managers

Managing in Multiple Sponsor Programs means: Marketplace

Multiple Custodian Interfaces

Trading

Reconciliation

Multiple Portfolio Management Systems

Sponsor vs. Manager Provided

Proprietary vs. Vendor

Consolidated Reporting

Multiple Ways of Doing Business

Account Paperwork

Procedures

Advisor vs. Sub-advisor

Technical and Operational Challenges for SMA Managers

2003 NICSA Technology Forum


Outsourcing operations

Not a New Concept for Investment Managers Marketplace

Mutual Fund Services

Custody, Clearing, Payroll, Benefits, etc.

Benefits of Outsourcing

Focus on Core Competencies

Reduced Upfront $ Commitment vs. Building

Scalability (Keeping up with Technology)

Staffing Peaks and Valleys

Offload Operations Risk

Speed to Market

Outsourcing Operations

2003 NICSA Technology Forum


Finding the right outsource partner

Selection Criteria Listed in Order Marketplace

Importance:

1. Stability of Outsourcer

2. Specific Expertise in Investment Area

3. People / Culture

4. Technology Platform

5. Cost

Source: Celent Communications Investment Manager Survey (March 2002)

Finding the Right Outsource Partner

2003 NICSA Technology Forum


Available outsourcing services

For Sponsors: Marketplace

All-inclusive SMA Platform Customized to create a Unique Turnkey Program for a Sponsor

Outsource Operations and Technology for your current SMA Program.

For Investment Managers:

Outsource Operations & Technology of your Multi-Sponsor SMA Business

Create your own SMA Product Platform to Support Alternative Distribution Channels

Available Outsourcing Services

2003 NICSA Technology Forum


Available outsourcing services1

Front-Office Marketplace

Money Manager Research

Capital Markets Research

Portfolio Design Support

Proposal System

On-line Account View

Available Outsourcing Services

  • Middle/Back-Office

    • Trading and Rebalancing

    • Account Set-Up and Maintenance

    • Reconciliation

    • Fee Calculation and Processing

    • Performance Reporting

    • Portfolio Accounting System

2003 NICSA Technology Forum


Solutions to challenges
Solutions to Challenges Marketplace

  • Industry Standards are being developed to streamline inter-firm processes

    • Money Management Institute (MMI)

    • DTCC

  • Open Architecture

  • Outsource

    • ING (Furman Selz) has Outsourced to BNY

    • Scalable solution for separate accounts

2003 NICSA Technology Forum


Managed Accounts Marketplace

Multi-Manager Challenges

Donald A. Foberg

Phoenix Investment Partners

2003 NICSA Technology Forum


Phoenix investment partners
Phoenix Investment Partners Marketplace

  • Phoenix Investment Partners (PXP) is a group of affiliated asset managers manufacturing and servicing Retail and Institutional investment products.

  • Retail products include Mutual Funds and Managed Accounts

  • Growth through acquisition strategy:

    • 11 Managers

    • 8 Investment Operations

    • Centralized Distribution - Wholesalers

    • 5 asset managers selling managed account models through sponsors

    • 2 back office operations supporting managed account processing

2003 NICSA Technology Forum


Strategy
Strategy Marketplace

  • Review all Investment Operations for STP capability

  • Develop an Operations and Technology Strategy based on findings

  • Select initiatives based on impact and need

  • Managed Account operations and technology first

2003 NICSA Technology Forum


Approach
Approach Marketplace

  • Focus on existing operational strengths

    • Productivity vs. industry benchmarks

    • Location

    • Staff - demonstrated expertise and intangibles

  • Focus on platform

    • Nature of the technology

    • Vendor position

    • Cost

2003 NICSA Technology Forum


What did we want to gain
What Did We Want to Gain? Marketplace

  • Scalability

  • Cost efficiencies

  • Expertise

  • PXP supporting Partners

2003 NICSA Technology Forum


Filters
Filters Marketplace

  • RFI delivered to:

    • Outsourcers

    • Software/Service Providers

    • Software vendors

  • Cross functional team reviewed and recommended direction

    • Do not outsource

    • Detailed review of the top three providers

2003 NICSA Technology Forum


Our top 3
Our Top 3 Marketplace

  • Existing in-house providers

    • CheckFree Investment Services - Security APL

    • FIN

  • DST International – MAP

2003 NICSA Technology Forum


Organizational issues
Organizational Issues Marketplace

  • Which location should the operation reside in?

  • Affect of a technology conversion?

  • Re-building the operations staff?

  • Who should manage that staff?

2003 NICSA Technology Forum


Technology issues
Technology Issues Marketplace

  • Existing platforms closely held

  • Could a new provider out-perform the incumbents?

  • Where was the industry model going?

  • How were the selected providers matching up to the developing industry model?

  • Connectivity to sponsors was/is king

2003 NICSA Technology Forum


Operational issues
Operational Issues Marketplace

  • Connectivity to dozens of sponsors

  • Order management

  • Order volume

  • Workflows

    • Manual

    • Repetitive

    • Need automation

2003 NICSA Technology Forum


Question and Answer Marketplace

2003 NICSA Technology Forum


Contact information
Contact Information Marketplace

Vincent Manning

Venture Financial Systems Group, LTD.

781-932-7544

[email protected]

Roger Gregory

DST International

617-210-6314

[email protected]

Chris Flynn

MFS Investment Management

617-954-5205

[email protected]

Dave Reinhart

The Bank of New York Separate Account Services

484-605-5113

[email protected]

Donald Foberg

Phoenix Investment Partners

860-403-6798

[email protected]

2003 NICSA Technology Forum


Biographies
Biographies Marketplace

VINCENT MANNING

Venture Financial Systems Group, LTD.

Managing Consultant

Vincent Manning is a Managing Consultant at Venture responsible for providing leadership in the development and implementation of innovative solutions to solve complex technical and business issues. Vincent actively works with senior management teams to assess current business and systems environments and proposes organizational and process reengineering solutions. He is responsible for directing and managing project teams to ensure timely and effective execution of management efforts. Mr. Manning’s engagements have covered both front- and back-office initiatives ranging from conceptual design through final implementation.

Over the past five years Vincent has led initiatives in every area of the trading cycle covering issues ranging from data modeling, business processing, enhancing trading systems, providing web-based reporting platforms, and the integration of front- and back-office systems to provide real-time positions, prices, and transactions.

Mr. Manning is currently a member of the National Investment Company Service Association (NICSA) Technology Committee. Prior to joining Venture, Mr. Manning was with Fidelity Investments as a Senior Business Analyst. Prior to Fidelity, Mr. Manning was with William M. Mercer, Incorporated for five years as a Consultant. Mr. Manning holds an MBA with a Strategic Management concentration from Boston College and a BA degree in Economics from Brown University.

2003 NICSA Technology Forum


Biographies1
Biographies Marketplace

ROGER GREGORY

DST International

Product Manager

Mr. Gregory has over 25 years of experience in portfolio management and accounting systems software development and is currently a product manager for DST’s Managed Asset Platform.

In this role, Roger is part of team responsible for both the functional and technical direction of DST’s managed account solutions and their current evolution.

Roger was previously responsible for the original design and development of DST's HiNet accounting solution, which is a rules-based client-server multi-currency portfolio accounting system, currently in use by many leading US financial institutions.

Mr. Gregory holds an M.S. in Computer Science and a B.A. in Political Science from Boston University.

2003 NICSA Technology Forum


Biographies2
Biographies Marketplace

CHRIS FLYNN

MFS Investment ManagementPrivate Portfolio ServicesAVP - Operations ManagementChris has been employed with MFS Investment Management for the past 13years.  He started at the firm in the role of custodian bank liaison overseeing the performance and relationships of MFS' custodian banks responsible for servicing their mutual fund business.

In 1992, Chris joined the Institutional Division of the firm serving as Accounting Supervisor for a large number of institutional accounts.  For the next several years, he managed much of the back office operations for the Institutional Division. In 1999, Chris was asked to begin researching and investigating the operational requirements involved in starting a managed account division.

Upon the formation of MFS' Private Portfolio Services Managed Account Division in 2000, Chris moved permanently into this division serving as Manager of Managed Account Operations.  His role is to support many of functions associated with in-house managed account operations.

Chris is a 1989 graduate of Georgetown University.

2003 NICSA Technology Forum


Biographies3
Biographies Marketplace

DAVID G. REINHART

The Bank of New York

VP - Separate Account Services

In his role as Vice President of BNY Separate Account Services, Mr. Reinhart is responsible for developing new business opportunities with investment managers seeking to outsource their multi-sponsor back office operations for separately managed accounts and/or develop a platform through which they can distribute product directly. Dave has been in the financial services industry for 16 years. His prior firm, EMAT (Electronic Managed Account Technologies, Inc.), was acquired by The Bank of New York in October 2002. EMAT was a start up in 2000 and Dave was responsible for the firm’s initial marketing efforts and business development. Prior to EMAT, Dave worked as a trader of mortgage-backed securities for BankAtlantic in Ft. Lauderdale, FL, Eastern Mortgage Corporation in Boca Raton, FL, Meridian Securities Inc. in Ft. Lauderdale, FL, and Meridian Mortgage Corporation in Wayne, PA. Dave is a graduate of The Pennsylvania State University.

2003 NICSA Technology Forum


Biographies4
Biographies Marketplace

DONALD A. FOBERG

Phoenix Companies – 18+ years total

Phoenix Investment Partners – last 11 yrs

Initially responsible for technology and infrastructure from mainframe through distributed computing environments across Life, Annuity and Investment company operations from 1984 through 1998.

Responsible for strategic planning and technology related to investment company operations and service since 1999.

Sponsored an STP readiness review of all partner investment operations in 2001/2002. That review revealed opportunities for improvement. As a result, a review of Managed Account Operations and technology was initiated.

The Managed Account Operations review validated that multiple platforms and back office operations provided the same inter-partner service. It also documented process, procedures and in-place technology. Our focus was to identify which technology platform would suit the firm’s strategic purpose. In addition to in-place technology, other vendor offerings were reviewed as part of a corporately administered program.

2003 NICSA Technology Forum


ad