DTCC Expands MAS Capabilities to Include Dual Contracts
DTCC’s Wealth Management Services unit is extending the capabilities of its Managed Accounts Service (MAS) to include another type of product: the dual contract.
A dual contract is a managed account that is growing in popularity with investors, sponsor broker/dealers and investment managers (IMs). The processing of these accounts is still largely manual, paper-intensive, cumbersome and costly.
DTCC originally developed MAS for separately managed accounts, but with the proliferation of new products in recent years, DTCC has been leveraging the service’s technology to bring equivalent processing efficiencies to these newer models.
The service, an offering of DTCC Solutions LLC, provides a single gateway for sponsors, IMs and service providers to exchange information. Automated, standardized features streamline account initiations, account maintenance and client profile updates throughout the lifecycle of a managed account.
“As the popularity of dual contracts grows, the industry naturally wants to avoid the types of operational complications that arose with the rapid expansion of separately managed accounts,” said Ann Bergin, DTCC managing director and general manager, Wealth Management Services. “By leveraging our MAS platform, we will be able to address processing bottlenecks quickly.”
Single vs. dual
In today’s environment, most sponsors maintain both single-contract and dual-contract accounts. In a single contract, the sponsor typically provides a level of research and due diligence on IMs and often stands as a co-fiduciary with the IM. Customers execute one contract with the sponsor, which covers the IM, advisor advice, trading, custody and performance reporting and trade execution. MAS currently handles these types of accounts.
Dual contracts require a customer to execute two separate contracts: one covering services provided by the sponsor, and the other covering separate services provided the IM. One example where a dual contract would be required is if a customer requires access to an IM that does not have a relationship with a sponsor.
Solutions to the problem
The most important issues facing the dual-contract industry, according to David Gardner of Smart Consulting, include:
- Technical inefficiencies and the need to develop standards around the message formats developed by The Money Management Institute (MMI) to streamline account openings and maintenance;
- Process and paper-flow inefficiencies;
- Regulatory and compliance requirements that will mandate firms to adopt new electronic message flows and more streamlined processes.
With industry input, DTCC has begun to develop the business requirements for dual-contract message development that will address these three areas.
“DTCC’s dual-contract straight-through processing initiative is a positive move for investment managers, sponsors and customers, as it facilitates portability, helps managers maintain client and advisor relationships between broker/dealers, and supports sponsor firms in their recruiting efforts,” said Michelle Curley, senior vice president and senior implementation manager, Citi GTS. “Converting highly manual tasks to electronic messaging and eliminating point-to-point communications and document processing will make it easier for customers, as well, since investing their money can begin almost immediately.”
DTCC is sharing its dual-contract business requirements with The MMI, with which it has a longstanding working relationship. The MMI’s far-reaching initiative to build message standards will result in a common electronic format that industry participants will use to transmit information and account instructions in conducting the business of opening and maintaining client accounts. @