Custody & Platform Conversions | Case Study

Project Summary & Key Issues

Client was a fully disclosed large national broker/dealer converting to another custodian.

1. Change in Service support method from home office to advisor enabled. The impact of such a significant change in the culture of how business got done was not fully appreciated prior to 1st Trade Date. Training occurred up to 90 days prior and advisors proved largely unresponsive or engaged
    
2. The client had a managed account platform in place. While the custodian had the same vendor on its’ platform, the actual offering and delivery were different and was not captured until late in the conversion.
    
3. Miscommunication regarding new system capabilities. Client had an expectation of business processing system capabilities which did not meet expectations when deployed.

Resolution | Key Learnings

1. Culture changes

The client and the custodian both underestimated the significance of the move to a self-sufficient advisor from a home office supported advisor. As such the normal system training was ineffective as advisors were resistant to the change and in denial that it would occur. Advisors didn’t accept training on the new system until after First trade date and they had difficulty conducting their business. As a result, the custodian had to virtually repeat all training after the system had gone live. 

Culture changes of such a high level of significance require a separate campaign within the broker-dealer prior to the start of training to communicate the commitment to the new expected behaviors. Measuring training effectiveness also provides a measure of whether the message is being received or more efforts are needed.

2. Platform Compatibility

While the broker-dealer employed the same advisory platform as the custodian’s offering, the platforms were in fact two different versions of the platform offering. Both the broker-dealer and the new custodian performed insufficient discovery to determine business requirements, assuming they were operating the same platform and that transitioning would only consist of a relatively simple mapping project.

Late in the conversion cycle, the mapping exercise was attempted and the significant differences were revealed. Significant resources were committed to get the platform workstream back on track as changing the First trade date that late in the cycle would result in even more resource and expense consequences as well as possible business disruption.

Responsibility for the inadequate discovery should be shared between the broker/dealer and custodian.  Most broker/dealers will only conduct one conversion to a new custodian in a generation, as such their perspective is understandably limited. The custodian had an over reliance on the platform vendor and didn’t perform its’ standard discovery which would have uncovered the platform differences. Assumptions on both sides proved erroneous.

3. Operational/Functionality Assumptions

As part of the conversion the broker/dealer wanted to incorporate business process management into their operations. The custodian described their offering as including a business process management tool. The business requirements were never completely fleshed out.

Upon deployment, it became apparent that both parties had different definitions of business process management. The broker/dealer was anticipating straight thru processing. The custodians offering consisted mainly of a document workflow process and did not connect to the actual account maintenance. Account opening and management resulted in using two separate systems not resulting in the operational efficiencies the broker/dealer had anticipated.

The disconnect between anticipated and actual outcome again resulted in insufficient time in discovery by the broker/dealer to set expectations and an inadequate explanation of capabilities by the custodian.

The broker/dealer expressed frustration as they had anticipated more direction from the custodian throughout the conversion cycle.