by Karen Clarke

Interest in DTCC’s centralized managed accounts platform and message standards is increasing, with Vestmark signaling its commitment to establish connectivity with DTCC’s Managed Accounts Service. The company is one of the leading technology application providers for managed account sponsors, investment managers and outsource providers.

Vestmark has already put in production the data communication standards created by the Money Management Institute, the industry trade organization, and plans to use its Vestmark Managed Accounts Platform (VMAP) to connect to DTCC’s service.

"The new service from DTCC will be a major benefit to the overall managed accounts industry," said Rob Klapprodt, president of Vestmark Software. "Vestmark’s clients, in particular, will benefit from increased operational efficiencies, superior customer service and greater flexibility in determining investment management options and distribution partners."

Citigroup’s Smith Barney Consulting Group and Global Transaction Services (GTS), the industry’s largest sponsor and outsource provider, respectively, signed on as charter participants in September.

As each of these participants moves toward a centralized communications system, they bring with them a variety of affiliated participants. GTS currently has nine investment manager firms that will link to DTCC’s platform, and Smith Barney has more than 200 investment managers in its consulting program. Vestmark services more than 20 firms.

"Smith Barney’s commitment has generated a renewed sense that the time is right for industry standards and a centralized, automated service for managed accounts," said Ann Bergin, managing director and general manager, DTCC Distribution Services. "We’re seeing tremendous interest from sponsors, managers and service providers who understand what DTCC has done to help other markets achieve scalability and cost-efficiencies, and see the benefits of our Managed Accounts Service to help them grow their businesses similarly. They acknowledge that projected industry growth will be difficult to achieve if they don’t change the current processing model."

First priority: new accounts

DTCC has placed high priority on addressing the industry’s most significant issue – the new account process. "Investment managers tell us they limit the number of sponsor programs they participate in because of the complexity of these communications," said David Gardner, external project director for DTCC’s service.

Establishing a new managed account can require hundreds of steps, because each account requires a diverse portfolio customized for that investor’s specific needs. The investor’s profile, restrictions and investment strategy must be relayed to each manager along with funding data and authorization to trade, and other details. Sharing that client data can require separate connections to multiple participants, along with dozens of phone calls and faxes.

"It’s an unwieldy and costly process. It can require days or even weeks and hundreds of dollars to set up a new account. DTCC’s service actually collapses these steps into one message that contains all 153 data points for a new account and automatically transmits that information in one easy step," Gardner noted. "You can see the appeal of one process and one message," he added. "No more faxes or non-secure emails with confidential client data being exchanged. And the investor’s funds are put to work in a fraction of the time it takes now."

Opening new relationships

Dana Fowler, director of operations for Smith Barney Investment Advisory Services, expects DTCC’s communications platform will open new relationships between managers and sponsors.

"This is the first step," Fowler said at the Money Management Institute’s Fall Conference this past October. "It’s a move that will have benefits for the industry as a whole." Those benefits, she told attendees, include improved efficiency and capacity, as well as an increased mix of managed accounts products. "The improved connectivity will help managers work with more sponsors and offer more sophisticated, institutional-quality products," she said.

Fowler also pointed out that sponsors will reap rewards, as well. "There are a lot of managers we’d like to see in our program, but they are smaller shops or institutional shops that haven’t been in the managed accounts business before," she explained. "For those who may have been deterred by the complexities and costs of retail managed accounts operations, this is a great way to get into a program."