Getting Started with DTCC Wealth Management Services

DTCC Wealth Management Services

At a high level, it’s easy to understand the value of using DTCC’s wealth management services. DTCC can help broker-dealers streamline manual processes and reduce overhead; this is particularly true for large financial institutions that spend millions of dollars on post-trade activities. But what about small to medium-sized organizations? When does it make sense to leverage DTCC’s services? And what does it entail? This article will help firms understand DTCC wealth management services, membership types, and what a DTCC – Terrapin integration entails. (Side note: when we talk about DTCC, this includes NSCC services, but for the sake of clarity, we will use the parent company name DTCC.)

Knowing When DTCC is a Good Fit

The core part of our service offering is helping firms get their data in good order, and as such, we start by analyzing all the various data sources with the intent to automate as much as possible. As a part of this process, we will evaluate whether using DTCC is suitable for your organization (in addition to other data intermediaries such as DST and DAZL). Typically, DTCC is a good fit for broker-dealers who conduct a significant amount of business directly with carriers and fund companies (aka direct business). Without a data aggregation platform, firms reach a point where manually tracking and managing various partnerships becomes too complex and precarious. And it’s not just limited to large institutions as we’ve found that the size of the firm can vary widely – from small independent firms to large bank-owned broker-dealers. However, there might be adequate coverage without DTCC or a combination of using DTCC/DST in some cases. Regardless, we will provide you with options and recommendations based on your business needs.

Understanding DTCC Membership Types

If it’s been determined that DTCC is a good fit, you need to decide the type of membership. There are two main membership types: Member (aka, Full-Service Member) and Limited Member. A Member may access all services made available by DTCC. In comparison, Limited Members utilize DTCC’s systems and services only on a limited basis. In other words, unless you use ALL of DTCC services, you are a Limited Member. There are eleven different types of limited memberships available, however, as it pertains to the services we provide to our customers, there are essentially three limited membership options (in addition to a Full-Service Member):

Fund Member
Mutual Fund/Insurance Services Member
Data Services Only Member

As part of our analysis, we examine your business requirements and align them to the suitable membership type. From our experience, one of the Limited Membership options will often suffice; usually, Data Services Only (DSO) proves to be adequate.

Worth Knowing: Settlement is not available for DSO Members, however, it is available to Members, Fund Members, and Mutual Fund/Insurance Services Members.

Selecting the Appropriate DTCC Wealth Management Service

After you’ve selected the membership type, we will help your firm decide on the suitable DTCC wealth management service. Our customers primarily leverage two main service offerings: Insurance and Retirement Services and Mutual Fund Services.

Insurance and Retirement Services

DTCC’s Insurance and Retirement Services (I&RS) enables insurance carriers and distributors to exchange information at various points throughout the annuity and life insurance processing cycle. The service consists of three main solutions:

Commissions (COM): automates compensation payments and provides same-day money settlement to broker-dealers, banks, and other distributors.
Positions and Valuations (POV): gives broker-dealers, carriers, and, indirectly, their customers access to detailed information about their investment programs, including current asset values.
Financial Activity Reporting (FAR): allows distributors to track daily investment activity and meet compliance requirements related to monitoring for market timing, late-day trading, and money laundering.

Mutual Fund Services

DTCC’s Mutual Fund Services (MF) facilitates business relationships between asset managers and their distributors, linking a vast network including fund companies, investment managers, broker-dealers, banks, trusts, and other financial services firms that offer fund investments to the market. There are two key offerings our customers use:

Networking: streamlines mutual fund account reconciliation and dividend processing, with the key capability of accommodating the networking for direct accounts, which involves the exchange of investor account data held directly with a mutual fund.
Payment aXis: formerly known as “commission settlement,” this service automates the processing of commissions and various mutual fund fee types, including Contingent Deferred Sales Charge (CDSC) payouts, 12b-1 fees (or trail commissions), and many other fee types.

DTCC – Terrapin Integration

Terrapin assists its customers with the DTCC application process, including selecting a settling bank (should you choose a membership that allows for settlement). Typically this can coincide with the Terrapin customer onboarding phase. Usually, the Limited Membership options move more swiftly than Full-Service Membership. Once your firm completes the DTCC membership process, it takes approximately one week for DTCC – Terrapin handshake to take place. From here, the final steps consist of working with carriers and providers to establish the networking for direct accounts. This process can take approximately 1-3 months. There are many moving parts and interdependencies between numerous parties. Additionally, the level of complexity, settling bank selection process, and the number of carriers/providers all play a role.

Terrapin has partnered with Depository Trust & Clearing Corporation (DTCC) and its subsidiary National Securities Clearing Corporation (NSCC) for over 20 years, helping facilitate the use of their services. We process numerous DTCC data feeds supporting their mutual fund and insurance products and services, including commissions, positions, financial activity, and settlement. Our industry expertise helps our clients navigate the DTCC membership process and provide guidance on DTCC services.