Hefren-Tillotson has been in the wealth management business long enough to appreciate the five Ps: perfect planning prevents poor performance. Its product-line reflects this, but did it apply the same rigor when it redefined its technology landscape?
As with a well-aged whisky, maturity in the wealth management space brings a sought-after constancy that many private and institutional clients have come to appreciate more than youthful exuberance, especially in these turbulent times. The experience that comes from longevity is clearly something that privately held Pittsburgh-based financial institution, Hefren-Tillotson, is only too happy to exploit. Since first opening its doors for business in 1948, it has grown into the largest full-service wealth management firm in the region, with more than 10,000 individual and small to medium-sized institutional clients on its books. Today it claims upwards of $6 billion assets under management,serviced by some 160 employees.
In part, it has achieved its elder states-man status by taking a path informed by a policy of getting to know exactly what its clients want; it was one of the first wealth managers to offer its clients a written financial plan based on a deep review of the individual’s long-term financial goals and objectives. The Hefren-Tillotson Masterplan, as it is known, covers everything from investments, estate planning and retirement to education and insurance. The concept was way ahead of its time, pre-empting today’s financial planning service offerings by at least 35 years.
Building a businesses of stature around a ground-breaking concept is one thing,but maintaining it, especially through straitened times, has seen Hefren-Tillotson’s asset management division engage in a serious rethink of its IT strategy in recent years.
Having made an informed choice – one that typically, for this firm, was allowed to mature slowly before coming to fruition – it is now using Charles River Development’s (CRD) Investment Management System(IMS) across its discretionary investment
advisory operations, covering separately-and unified-managed accounts.
Prior to CRD gaining the nod, Hefren-Tillotson had been relying on the order-entry system of its custodian, Pershing Advisor Solutions (which is backed by the resources of its parent company, BNY Mellon). It had also been building some of its larger block-orders through the ubiquitous Excel spreadsheet. ‘We had quite a bit of manual entry in our processes,’ comments Don Belt, chief investment officer for Hefren-Tillotson. ‘We were exposed to trading errors and the implementation speed was far longer than we wanted.’
The decline in sustainability of its former limited set up, particularly around its fee-based business, was progressive. ‘We could see it coming,’ states Belt, citing ‘some pretty strong account growth over the past decade’ as a major factor in the decision to upgrade. Although there had been an increasing ‘sense of urgency’ to take its technology to the next stage over the last few years, the firm drew upon its maturity, took its time and went through ‘pretty deliberate process prior to making the decision’.
Extensive research into different third party systems was undertaken and a conversation was also had with Pershing ‘to see what it could provide’. With adoption of a third party solution looking like the most appropriate route (no in-house build
was even considered), Advent’s Moxy became an initial front runner, that vendor already supplying Hefren-Tillotson with its Axys portfolio management, reporting and accounting platform. ‘We talked to other users of Axys to see what systems were compatible,’ recalls Belt, ‘but we also continued looking at industry publications and building a list of other companies to review before narrowing it down’.
Advent, along with fellow US-based vendor, CRD, made it onto the shortlist. The selection team had four key criteria comprising reputation and the vendor’s history and product development; software capabilities and the flexibility of the system to fit into Hefren-Tillotson’s existing workflows and portfolio management needs;positive customer references; and last, but by no means least, a competitive pricing structure. ‘CRD came out ahead in all those,’ confirms Belt.
The deal for the IMS system was signed in early 2009 and CRD quickly assigned a project manager so that the initial implementation phase could commence. This involved an in-depth assessment and planning review, working with Hefren-Tillotson’s
own project manager and business team, to define the scope of the project.
Having thoroughly prepared the ground for installation, a ‘walk-through’ of the proposed workflow took place; this to confirm it was as efficient as it could be before initial configuration of the system.‘We did need a lot of customisation to our workflows and business type,’ admits Belt,adding that the capacity to handle such a process was one of the reasons for choosing IMS. The testing, training and documentation phases rolled onwards consecutively.
As with all projects, issues lay in wait for the project team. ‘We had to do some system upgrades,’ Belt recalls. ‘But probably one of the biggest efforts was in integrating the work and the systems of the different vendors.’ With IMS needing to interface to Hefren-Tillotson’s FIX (Financial Information eXchange) messaging protocol provider, its Pershing custodian system and Advent’s Axys, ‘trying to get all the different parties working together and staying consistent with our time-line was a bit of a challenge’.Management of this, naturally, was designated an in-house task.
With final deployment taking place just three months after project kick-off (on time and on budget), IMS is now working ‘very well for us’, notes Belt. Within days of going live, he says Hefren-Tillotson had ‘significantly reduced the time spent calculating allocation targets, executing trades, examining the tax impact of potential trades, and rebalancing accounts’, all of this ‘in real-time and across our organisation’. Belt adds that ‘all of the system’s capabilities fit our needs’.Of course, the upgrade of the IT landscape is ongoing and there are some enhancements in the latest IMS version that Hefren-Tillotson will ‘probably want to take advantage of’, notably functionality covering replacement securities. This aspect, he says, has a tentative roll-out scheduled for next year.
When all is said and done, it is a testament to Hefren-Tillotson’s preparation and planning – not just in the project phase, but in selection mode too – that IMS was switched on with no great drama. Belt explains that ‘we did do a lot of planning upfront and that prevented any major shifts in the project’. Given that Hefren-Tillotson has been planning and preparing for its clients’ future needs longer than most wealth managers out there, this, perhaps, should come as no surprise. Age, maturity and application of the five Ps to all aspects of the business, in this case, really has delivered the results that others can only admire or envy.