Trust Clients Demand Faster Access: Banks and Trust Automation Vendors Are Racing to Develop On-Line Links for Their Institutional Trust Clients

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Up till now, banks that provided their institutional trust customers with on-line access to their account holdings have largely developed the necessary technology inhouse, leaving software vendors to chase other applications. That appears to be changing, due to the increasing demands of institutional clients for sophisticated new accounting and reporting capabilities.

On-line systems have become increasingly powerful, which is good news for institutional asset managers who want more control over routine analysis and reporting tasks. But clients with holdings in several trust institutions are required to maintain several on-line systems that may be proprietary to the banks and therefore expensive to support.

A single open system for managing multiple institutional trust accounts is probably years away, but developments now occurring are paving the way to such a system.

Out with the old. The market for personal computer-based links between custodians or master trustees and their clients looks promising, particularly as trust systems developed in the 1970s and early 1980s become obsolete and more institutional holdings are invested overseas. To keep clients from looking elsewhere for automated investment management solutions, banks are more willing today to supplement their proprietary offerings with vendor programs than they were in the past.

Mellon Bank provides an example of the trend. "Multicurrency reporting and accounting is very hot," says Robert Boyles, executive vice-president in the trust and investment management division of the Pittsburghbased bank.

Mellon purchased a global securities movement and control package from Vista Concepts, Inc., New York, rather than try to build that capability itself. "It's a combination of timing, cost, flexibility, and availability of system resources," says Boyles, "so in that case, we went outside for the solution."

Some nonbank vendors are now putting the finishing touches on "frontend" systems that connect trust clients with banks' hostbased applications. But banks with solid technology offerings, like Mellon, Bankers Trust, and Norwest, to name just a few, may have an advantage over the vendors in that they are closer to the business needs of their clients.

Specialized offerings. "Every major custodian and trustee has a different niche in the marketplace, so you need to develop a product that very precisely meets the needs of each institution's client constituencies," says Timothy Keaney, vice-president and manager of administration, marketing, and sales, for Mellon's institutional trust division. "The way I look at business is very different from the way State Street Bank-with large public fund accounts-does," he adds. "You need to be close to the business in order to build the right tools."

Over 60 of the bank's institutional clients use a PC-based service called Executive Workbench, which provides those clients with daily portfolio information they can analyze and create management reports with.

The service is now in its third version and runs in IBM's OS/2 operating system with windowing and multitasking capabilities. The system was developed in-house by Mellon staff, using vendors in the building process. Client perspective. Besides basic custody and safekeeping services, Executive Workbench client Textron Investment Management Co. was looking for performance measurement, pricing, and on-line access to its portfolio. "On-line access was the most important factor in moving our account to Mellon, as far as I was concerned," says Deborah Imondi, vice-president of operations at Textron Investment Management.

Such systems also serve as a window into the bank's account performance, because clients can see account activity without waiting for reports from the bank issued after the fact. "We can see on a daily basis what transactions have posted to the account," notes Imondi, "including what has settled and which items are in suspense, how long it takes the bank to post checks, and so forth. …