NEW YORK—A new report by Peridrome Corporation, a leading developer of automated solutions for the Managed Accounts Industry, identifies potentially unexpected challenges in client servicing, product development and distribution arising from an anticipated shift to models-based operations. An analysis also suggests that solutions to these challenges may represent new opportunities for outsourcers, investment managers and sponsors. The findings are based upon the perspectives of a broad group of industry insiders recently surveyed by the company. Details of the survey are now available in a white paper that can be downloaded at www.peridrome.com.
The report, titled “Managed Accounts Executive Outlook: Trends in Distribution, Operations and Technology,”
“Although these areas have been the focus of discussion and development for the last several years, our study represents the first time they have been analyzed as a group with dependencies affecting the evolution of each,” notes Gib Veconi, the report’s author and president of Peridrome.
Last fall, Peridrome undertook a survey of 75 executives from investment manager, sponsor and outsourcing firms that covered a range of topics related to product support, distribution relationships, staffing and technology, and anticipated future changes. Responses provided a broad perspective on expectations for industry development over the next three years, but also highlighted gaps between current participant capabilities and expected future needs. The report recommends strategies for industry participants to capitalize on anticipated trends.
Key findings
The expansion of models-based distribution will change the landscape of operations in the managed account industry. Representing a small share of the total number of managed accounts today, models programs may account for nearly all of the net growth in accounts over the next three years when compared to traditional managed account platforms.
Supporting traditional distribution platforms and models-based platforms at the same time will make operations more complex for many managers. As has been the case in traditional managed accounts programs, sponsor-specific solutions for streamlining communications between sponsor and manager in models programs may create a barrier to new distributors entering the market.
Sponsors, managers and outsourcers surveyed were most likely to identify client request servicing as the least scalable aspect of their business. Sponsors will aggregate client servicing responsibility along with the accounts they add (and transition) to their models programs. This will require sponsors to support service operations at a level presently unknown in the industry. Perhaps for this reason, sponsors consider their firms more likely to outsource operations over the next three years than do investment managers. However, responses indicated the current productivity of outsourcers in client request servicing may be less than that of today’s larger investment managers.
Current process management solutions may not be sufficient to meet the coming client servicing challenge. Firms that have adopted document management and automated workflow were just as likely to find client request servicing as being their least scalable function as firms who have not. Further, responses did not show a correlation between a lower number of staff in new accounts and portfolio admin departments and the adoption of workflow.
“What we’ve concluded is that the increased adoption of models-based distribution over the next three years will make solving client service scalability a critical challenge for sponsors,” said Mr. Veconi. “Outsourcers appear to have an opportunity to service this need, but will need to innovate in terms of process and technology. Notwithstanding a significant increase in the share of managed accounts distributed on models platforms, we don’t expect models to substantially replace traditional managed account distribution over the next three years. Peridrome believes managers with strong fixed income and international product disciplines can address a growing demand for these offerings and expand distribution on traditional platforms. These firms will have an opportunity to combine industry communications standards with new third party technology solutions to build scalable operations in a cost-effective manner.”
Contact: Gib Veconi Peridrome Corporation
(877) 363-7770 x101
Full White Paper Available Upon Request
