“The service provides “real solutions for real problems,” Iyer said. “When you think about the benefits you will derive from automation, it makes for a pretty compelling case.” Citigroup Smith Barney’s Consulting Group and Global Transaction Services, the largest sponsor of managed accounts, are charter clients working with DTCC to launch the service.

Speakers included Donald F. Donahue, DTCC chairman and CEO; Ann Bergin, managing director and general manager, DTCC Wealth Management Services; Christopher Davis, president of the MMI; and investment managers, sponsors, outsourcers and vendors that are collaborating with DTCC and the MMI to deliver efficiencies to the managed accounts market.

The solution

“There is growing recognition that operations must become more efficient to support continued growth in this market,” said Bergin. “The average asset manager is working on 19 distinct sponsor platforms, which creates a chaotic mix of communications that squeeze the manager’s time and profit margins.”

Donahue spoke to the group about the capabilities and commitment DTCC brings to this initiative. “We are all working together to help you grow your business, improve performance and reduce costs,” he said.

Rob Klapprodt, president of Vestmark Software, emphasized the value of working with DTCC to address the market’s needs. “DTCC has a history of adopting standards to bring order to complex, global financial transactions, and we are proud to be piloting the new service.”

Growth hampered by inefficiencies

Managed accounts are growing at a strong pace. Today, the value of these assets is estimated at more than $740 billion, a number that is expected to balloon to $1.5 trillion by 2011 as baby boomers begin to retire.

Yet the current processing environment remains stuck in the last century. The information required to set up a new managed account is moved through typically nonsecure channels including email, regular mail, fax and telephone. In addition, confidential data are transferred 10 to 20 times until the investment manager has all the information needed to invest the client’s money. As a result of this inefficient, labor-intensive process, managed accounts transactions are risk-prone, with initial account setup taking up to 80 days to complete.

 “In the long run, the investment manager’s goal is to enhance the client experience,” said Elena Geraci, director of Lazard Asset Management LLC and a panelist at the conference. “The standards will certainly shorten the time it takes from the moment the investor walks into the office until he or she sees notice of the authorization to trade. And DTCC’s hub is a more secure method of transmitting the client’s private, personal information than any process we use now.”

Messages are transmitted using XML, a highly flexible messaging standard, and the service is platform-neutral, so sponsors and investment managers can continue to use their preferred vendors.

The mutual funds experience

To illustrate how technology solutions contribute to volume growth in financial services, Donahue pointed to DTCC’s experience in bringing automation to the mutual fund industry 20 years ago.

“As the effects of automation and streamlining kick in, the rate of growth turns more geometric,” Donahue said, noting that mutual fund volume grew from less than one million transactions in 1988 to 143 million transactions in 2006. “We believe today’s session is a milestone event on the road to that kind of market expansion.”

Saving the ‘beast’

“This solution will save the beast,” summed up Toby Tolino, assistant vice president for business support and operations, ING Investment Management, who attended the conference. “The growth projections for separately managed accounts are tremendous, and this service will ensure they remain a viable investing option. On the investment manager side, this solution will free us up to do what we do best, which is manage money.”

The MMI’s Davis made a case for sooner is better when it comes to signing on for the new service. “Early adoptors can help influence what’s next and where we’re headed in the future,” he said. “You will be viewed as great for having been early adopters. The later adopters will be viewed as good citizens. But in this industry, good never catches great.”