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Wealth Manager Finds Growth With New OMS

Captrust Financial Advisors lays the foundation for future acquisitions by modernizing its order management system.

Whether it's the modern regulatory climate, the expectations of a mobilized world, or just plain obsolesce, order management is keeping many buy-siders awake at night.

"Although existing portfolio management tools that include order management are certainly not the oldest technologies at buy-side firms, wealth management executives tell us that portfolio management platforms are the most valuable technology tool for driving competitive advantage," says Peter Delano, a senior research director with CEB TowerGroup Wealth Management.

According to research by the Delano and others, solutions have evolved to include many new processes, including workflow capabilities that are accessed by business users across the firm. In addition to automating rebalancing, handling alternative investments and improving client reporting, modern solutions also deliver portfolio and trading data to tablets, freeing portfolio managers from the confines of the office.

Yet many firms are still behind the curve. "Our research shows about 51 percent of wealth management firms are relying on portfolio management solutions they installed in 2007 or before," Delano says.

Such was the case for Raleigh, N.C.-headquartered Captrust Financial Advisors in late 2011. While various systems would soon need attention, the order management took priority.

"Rebalancing took too long and the number of accounts we were seeking to trade was overwhelming our existing system," explains John Appleby managing director for the growing 22-location firm.

[As a financial firm located in North Carolina, Captrust does some innovative things to recruit and retain technology talent. To find out more, read: IT Talent Retention Requires Shared Ownership].

According to Delano, Captrust isn't alone. "There's a significant interest in rebalancing functions," he says. "Firms are trying to automate more rebalancing processes to remove that strain on a portfolio manager's time."

The trend toward expanding asset classes is also taking a toll. "Additional asset classes are becoming important to serving individual investors," Delano says. "That makes support for alternative investments an essential component in a platform."

A Multi-Custodian Predicament
To solve its order management predicaments Captrust attempted to work with its incumbent vendor. But, ultimately, comprehensive market review began in early 2012.

"A primary driver was multi-custodian capabilities," explains Appleby. "We wanted to look at all of our custodians on a single dashboard and have the ability to drill down to trade on each platform individually."

Additionally, Captrust required more sophisticated system for handling its growing pension plan consulting business. "At the time," explains Appleby, "we were calling the custodians for market values, punching them in a spreadsheet, performing our analysis and then sending trade requests back to the custodian for trading."

Captrust's growth strategy also played a role. "When we acquire a firm we fully integrate them to create one unified practice," Appleby says. "Because all trading is centralized, we wanted an OMS [order management system] that could enable our growth strategy without requiring us to add a third trader."

By late summer 2012 Captrust settled on a hosted version of Linedata Longview. "It really came down to managing the type and volume of accounts we that we trade," Appleby says. "They could model our accounts better than the competition."

With Captrust's existing hosted OMS contract expiring at year-end, the race to deploy Longview began in October. Captrust's 10-member IT staff worked with Linedata's team, which included an on-site implementation specialist. "Their system needed tweaking to work with our trading platform and our portfolio management system, Advent APX," says Appleby.

Although Longview rolled out smoothly on January 1, 2013, a planned component remains under development. "We're still grappling with security substitution," says Appleby. "Whenever portfolios are unable to acquire a greater position in a specific security, we want the system to default to purchasing pre-defined substitutes that are similar and then to kick out those exceptions for review.

"Of course it's complicated to build out," he adds, "we're still working closely with Linedata to get it done."

A Marathon, Not a Sprint
Captrust's situation demonstrates the value of post-rollout vendor engagement, notes Delano from CEB TowerGroup. "We stress ongoing support," he says. "This includes the stability of the software vendor, their proven ability to innovate, the extent to which their roadmap aligns with your business and a willingness to develop an engaged user community."

Apparently, leaders at many firms are getting the message. "We're seeing that firms aren't looking for a date, they're looking for a marriage," says Gavin Little-Gill, managing director for North America at Linedata, "They're not only considering what they need now, but also what they'll need five years from now and where our business will be at that time."

[For more on how another firm, Baron Capital, replaced its OMS, watch this video: Trading Desk Of The Future: How To Pick The Best OMS/EMS].

"In addition," he adds, "firms now want vendors to meet requirements, not just offer product features. They want technology solutions that help them eliminate customizations and proprietary solutions across their business."

Like any good marriage, both sides need to be clear about their expectations, Delano notes. "Many times wealth management firms fail to take the time to bring all of their internal stakeholders to the table and agree on a common framework before meeting with vendors," he says. "When this happens, vendors get mixed messages."

"Instead, it's vital to hammer out the details in advance and be very precise," Delano continues. "You'll receive better support from your vendor partner because they'll have a clearer view of what's most important to your firm."

But it's not just buy-side firms that need to communicate precisely. It's equally important to ensure the language in the vendor's statement of work accurately reflects expectations. "In general, firms should spend plenty of time reviewing the details in the statement of work their vendor provides," he says. "Language can have different meanings, so it's vital to ensure you define words the same way your vendor does before the final contract gets signed."

With respect to the Linedata implementation, Appleby gives it a big thumbs-up. "Even though our number of accounts grew significantly with the recent acquisition, we're trading faster than we were previously with the same number of traders," he says. "The time required to fully execute a tactical trade across all of the accounts previously took a couple of days but now we're getting it done within a day."

"Overall, adopting Linedata has been a significant benefit to our organization," he adds. "We're looking for more companies to acquire and the OMS gives us the foundation to continue scaling up the business, which we couldn't do with the system we had before." Anne Rawland Gabriel is a technology writer and marketing communications consultant based in the Minneapolis/St. Paul metro area. Among other projects, she's a regular contributor to UBM Tech's Bank Systems & Technology, Insurance & Technology and Wall Street & Technology ... View Full Bio

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