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Bank of New York Deals Boost Managed Accounts

The Bank of New York (BONY) has just signed managed account deals with insurance giant ING Group and a small North Carolina trust company to expand its managed account niche by supplying products to smaller companies and back-office services to larger ones.

The bank will supply back-office operations for ING Investment Management Americas' managed accounts business and managed account products and services to First Citizens Bank and Trust in Raleigh, N.C.

The ING deal nearly doubles Bank of New York's managed accounts under administration, from 40,000 accounts with $8 billion of assets to 70,000 accounts with $15 billion. Thomas J. Perna, an executive vice president at Bank of New York, said his firm's strategy is to expand the managed account business by developing third-party relationships.

"We typically don't compete in these spaces with large investment managers," Perna said. "We are not a major asset manager. I don't think you will find an asset manager that considers us a competitor. Our mission is to enable other banks, other firms, to grow their business. We provide infrastructure to the larger companies and products to the smaller ones."

Bank of New York has been developing its managed account capabilities in the past year. In August it bought Lockwood Advisors Inc. of Malvern, Pa., the largest provider of individually managed account services to independent financial advisers.

Richard A. Shearer, a senior vice president and the head of Bank of New York's North American banks division, said Lockwood gives BONY the products and services to provide managed accounts to small banks and trust companies nationally.

"There is a rapidly increasing demand for managed accounts from all institutions, not just the largest institutions," Shearer said. "These are sophisticated products and can be challenging for a trust department, particularly a trust department at a small bank."

Bank of New York has also joined forces with Metavante Corp., the Milwaukee financial technology company that is a subsidiary of Marshall & Ilsley Corp., to deliver managed account services to trust companies. First Citizens, which has $12 billion of assets, is the first bank to offer managed accounts to its customers through the Bank of New York.

The Bank of New York-Metavante service allows a trust company to select investment advisers for its clients from a list of money managers who provide investment management services for each client in a separate account. Bank of New York supplies execution, clearing and custody services for the investments using Metavante's trust accounting system.

Allen Smith, an executive vice president in First Citizens' wealth management services division, said managed accounts have not been easily accessible to trust clients but that Bank of New York offers a solid platform for rolling out managed account programs.

Perna said that, besides products, the Lockwood deal earned Bank of New York the technology to offer back-office support to large financial institutions.

"Lockwood has the products to deal with our individual customers, but they also have the technology for our larger customers," Perna said. "Our products are not a significant competitor to Merrill or Morgan Stanley or ING, but our technology can help them."

Bank of New York will supply operations and accounting functions for ING Investment Management's managed accounts. Among the operational functions to be assumed by Bank of New York are account opening and maintenance, trade support and reconciliation.

Industrywide, assets in separately managed accounts declined 5.6%, to $392.57 billion at Sept. 30, compared with the second quarter, according to quarterly data from the Money Management Institute. Jim Marren, a spokesman for the institute, said fourth-quarter data is expected to be released shortly, showing that managed accounts ended 2002 with assets totaling $395 billion to $400 billion.

Christopher L. Davis, the institute's executive director, said only two banking companies, Bank of New York and State Street Corp., are aggressively going after back-office opportunities that providers, large and small, do not want to be bothered with.

"Banks don't want to build service functionality; they want to do business," Davis said. "Bank trust companies are hemorrhaging assets because they don't have all the products their customers want. By offering these products they can maintain assets at banks."

Perna said Bank of New York is aggressively seeking deals with both large and small companies.

"You are going to see more deals like this over the coming year and beyond," he said. "I think it is getting more and more expensive for asset managers to handle these products. They want to distribute managed accounts. They want to offer managed accounts to their customers, and they want us to do the rest."

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