MFS Investment Management has licensed CheckFree Investment Services APL WRAP to handle the portfolio management operations of its new Private Portfolio Services division. MFS is running the new division as a separately managed wrap-fee business, and therefore needed back-office connectivity with the various broker/dealer sponsors of such wrap-fee programs. According to Bill Taylor, director and senior vice president of the new division, APL is the most widely used system for this investment management style and the clear choice for the upstart group.
"We didnt do a lot of research," Taylor admits. "I had operated APL at another firm, and we knew that it was kind of the industry standard. I would say that 75% of the industry uses APL. I knew we could work with them well, so we felt like the point of least resistance was to the most popular program."
Taylor, who was hired by MFS seven months ago to found the Private Portfolio Services, says APL will be used primarily for its portfolio accounting and trade modeling capabilities. The actual trading of securities may be accomplished through MFTP -- the Merrin Financial Trading Platform now owned by the MacGregor Group which is used company wide, or through another third-party system.
Taylor says that the most difficult part about setting up a wrap-fee business is being accepted by the firms first, a lengthy review process undertaken by the broker/dealers analysts. Signing up with APL makes the prospective investment manager more attractive as it fulfills some very necessary criteria.
"You have go through the due diligence by the analysts before youre even placed before the brokers," he says. "They need to be sure that you have the back office and operations to handle this type of investment program. If you tell a firm that you have APL up and running, they know youre ready for business."
Also key to the success of the new MFS division is that it has access to many broker/dealers who use APL as their wrap-fee accounting system. Taylor points out that larger wire houses tend to have their own accounting system in place, but have established electronic links to APL, thereby negating the need to do any technology customization in order to transact. Other firms such as Merrill Lynch actually use APL as their core system.
Taylor says the division is fully live on APL, but hasnt yet taken on its first account due to "some internal things we need to solve first." He expects the division to be investing by the end of April.