Managed Accounts Solutions: Operational Due Diligence

By Vincent Manning

Drilling down on key functional characteristics within each of the five core operational components of managed accounts solutions, the following checklist should be used in evaluating solutions:

Account Management
Viable solutions must provide automated workflow processes to minimize the organizational impact associated with all account management functions. These functions include, but are not limited to:

  • Integration with sponsor systems to allow for automated flow of data;

  • Verification of new account paperwork;

  • Resolution of discrepancies;

  • Establishment of investment restrictions;

  • Posting of initial cash and/or assets;

  • Historical data trail with archiving features;

  • Proper closing of accounts when necessary;

  • Verification and reconciliation of closed accounts;

  • Standard and customizable reports and data feeds;

  • Update of client information as appropriate over time (e.g., profile data, investment restrictions, additions/withdrawals, etc.); and,

  • Availability of user-defined fields for account customization.

Portfolio Management
A successful portfolio management solution will have specific managed account functionality and provide:

  • Tax lot accounting;

  • Detailed modeling and rebalancing options;

  • Tax management;

  • Dynamic or static modeling for both standard managed accounts and multi-style accounts;

  • Compliance monitoring;

  • Corporate action processing;

  • Inter-day position updates;

  • Interfaces with internal and external data providers;

  • The ability to accommodate a wide range of security types and transactions; and,

  • Import/export functionality.

Trading
Trade order management functionality must address:

  • The ability to block orders across models by sponsor;

  • Order monitoring;

  • Manual manipulation of orders on blotter;

  • Compliance with industry messaging standards (e.g., FIX);

  • Interfaces with internal and external data providers;

  • The ability to accommodate a wide range of security types and transactions; and,

  • Import/export functionality.

Reconciliation
Reconciliation functionality must be provided to allow for the ability to:

  • Shadow all accounts;

  • Reconcile all positions on a daily basis;

  • Track asset movements;

  • Automate the reconciliation of data feeds between sponsors and/or custodians;

  • Manage changes to static account data;

  • Manage changes to security master data; and,

  • Import/export data on demand.

Performance Reporting
Performance calculations and reporting must provide the ability to:

  • Calculate daily performance returns by account and product;

  • Calculate total portfolio and sector-level returns;

  • Provide comparisons against multiple benchmarks;

  • Produce detailed reports;

  • Provide AIMR-compliant composites, and,

  • Import/export data on demand.

Vincent Manning is a managing consultant with Venture Financial Systems Group, Ltd., a consulting firm specializing in delivering business and technology solutions to the investment community. For more information, please call (781-932-7544) or visit our web site www.venturefsg.com.