The separately managed accounts business could be just weeks away from an early Christmas present " a secure messaging system of its very own.
Being built by the National Securities Clearing Corporation (NSCC), the communications system will standardize they way account-opening information is sent between plan sponsors and investment managers. They industry has been hampered in its growth because investment managers are often required to maintain systems and connections to multiple plans sponsors which can cause infrastructure expenses to soar.
SMAs have become a popular investment choice for mass-affluent type investors ($100,000 in investable assets) who desire more personal money management than a mutual fund offers but don't possess the assets-under management required for complete hands on treatment.
Vincent Lepore, senior adviser to the Money Management Institute's Board of Governors, says the new system should take quite a bit of work off the SMA industry's plate, especially for investment managers. The Money Management Institute is a trade association dedicated to the separately managed accounts industry.
Lepore, formerly chief operating officer with Furman Seltz Capital Management, says, "Essentially, NSCC is going to act as a messaging conduit, however, it will eliminate multiple messaging conduits that are in place in the industry right now."
He says that the Web is far too insecure to handle the type of information that flows between the SMA participants, which includes broker/dealers, investment managers, technology firms, custodial firms, trust companies and independent advisers. NSCC, he adds, was the perfect choice to build the system because it has existing connections with virtually all players in the industry. "NSCC is just adding a communications messaging layer on top of its present infrastructure," says Lepore.
He says NSCC is in a production environment with the system now and could go into live production in a month or so, depending on the degree of industry participation. For firms interested in linking to the system or learning more about it, Lepore suggests calling the NSCC's Angela Pearson (212-855-5656).
Participants will be charged on a tiered, per-message basis " more messages mean a lower cost per message. As the number of participants rises, he says, the price will also go down. Additionally, early adopters will receive rebates.
Lepore says the new system could go a long way to helping the SMA business reach its potential. "I think the NSCC's messaging platform will do for the SMA businesses what it did for the mutual-fund business 20 years ago."