PROVING OUR CASE

A Family Office Case Study

Existing Family office workflow

The Smith family office had a cumbersome and fragmented trading process. Once the portfolio manager made an investment decision, the traders would phone trade orders to the respective brokers, manually record a trade ticket, then wait for execution fills to be reported back via phone. Once execution reports were received, the back office personnel would manually calculate appropriate allocations into over 100 customer accounts and enter them into the portfolio management system. At the end of each trading day, written trade tickets were sent to the custodian via messenger. The custodian faxed or e-mailed confirmations the next morning.

The traders spent a good portion of the day calling brokers, changing order instructions, and waiting for trade reports; all via telephone. They were watching market activity, yet had no control over the trades and were reluctant to change instructions due to the massive effort required to contact the multiple brokers. Meanwhile, execution reports from the brokers came back with differing average prices; making trade allocation a tedious error-filled task as back office personnel made frequent mistakes manually entering allocations into the portfolio management system. Needless to say, this caused frequent errors in customer account reporting.

Inefficiencies of the Smith family office current trading process

1. Inefficient trade execution
2. Data errors due to manual communication
3. Frequent trade breaks
4. Excessive custodian fees
5. Wasted resources (which can be allocated to managing the business)

Family Office Needs

Integrated Order Process ™ after implementation of IMPACT ™

Upon deployment of IMPACT Pro™, the Smith family office achieved an Integrated Order Process™ and a significant improvement in workflow efficiency. The traders enjoyed direct electronic connectivity to multiple pools of liquidity, including preferred brokers as well as ECNs and market makers. The traders were able to control the trade with advanced trading tools while maintaining complete anonymity in regards to their market participation. Brokers and ECNs were unaware of orders from the Smith Family, and the trading strategy was effectively concealed from the street. Additionally, the traders have access to advanced trading tools such as list trading, VWAP orders, and time sliced orders, while contributing hidden liquidity via discretionary bid/ask volume display. Trades executed in IMPACT Pro™ are reported back instantaneously with an average price and a time stamp. Furthermore, traders benefit by having time & sales data ensuring best execution.

Once trading is completed, several custom reports summarizing daily trading activity are available. Users can generate daily activity audit trails satisfying compliance requirements mandated by customers and regulatory agencies. The audit reports display trading activity and trade allocations demonstrating account management on a pari passu basis. Traders can also pre-allocate trades across customer accounts via pre-defined templates. At the end of the trading day traders can seamlessly export all trading activity and allocation instructions to contra-parties such as custodians and portfolio management systems via electronic flat file interfaces. All manual data entry processes have been integrated within the IMPACT Pro™ operating platform. With IMPACT Pro™ The Smith family office has achieved Integrated Order Processing thereby significantly reducing operating expenses.

IMPACT Pro™ Benefit to Family Office

Portfolio Manager / Trader

• Electronic access to brokers (including existing relationships)
• Control of trading to portfolio manager/trader
• Anonymity in the marketplace
• Efficient execution of trades

Back Office Personnel

• Automated post-trade allocations based on predefined templates to reduce manual processing
• Seamlessly connectivity to in-house portfolio management system
• Electronic export of data to custodian daily with confirms received same day.

Manual Process before Implementation of IMPACT™

Integrated Order Process ™ with IMPACT ™  

Appendix 1 illustrates the Integrated Order Process ™ after implementation of AFA’s technology. For more information, contact (212) 286 1245 or visit us at www.afapp.com.