ChatGPT would start this article with “In the world of financial advisory and wealth management, staying ahead of the curve is crucial.” Little does it know how persistent the old ways are in wealth management. Some portfolio managers still send orders via emails, chats, and voice.

At the same time, there are firms looking into the latest developments in order and execution management systems, battling over whether they should be separate and how to use them to streamline business workflows.

At Devexperts, we’ve been working closely with wealth management firms since 2002, so we’ve seen it all: an investment fund tired of voice trading, private investment companies stuck with third-party legacy software and outdated UX/UI, documentation flow chaos, tiresome spreadsheets without a sign of automation, and firms abandoned by their software vendors when it was time to scale.

A modern, sturdy order management system built specifically for wealth management is a universal solution to almost all of the issues mentioned above.

Before going further, let’s define an OMS worth investing in.

What is an Order Management System (OMS)?

An order management system (OMS) is software that automates managing orders from initiation to fulfillment, allowing businesses to track orders in real time, monitor inventory levels, and manage shipping and delivery schedules.

Investment managers usually rely on an order management system primarily focusing on front- and middle-office functions. Such a solution improves daily investment operations by automating allocations and providing position checking and compliance.

The systems we’ve delivered to our clients also allow them to model portfolios, monitor exposure and P&L in real time, and efficiently route orders.

An OMS needs to be scalable and flexible. Our clients’ businesses grow, and the software we provide should be on par with them. Gone are the days when wealth management OMS didn’t have to be supersonic fast because the order flow wasn’t as intense as a broker’s.

Flexibility is required so a firm can add asset classes or specific workflows.

Not long ago, one more requirement emerged: the capability to invest in securities in fractional and notional quantities. Let’s dissect what investing in fractional and notional quantities is and how a fractional OMS can benefit a wealth management business.

Definition of investing in fractional and notional quantities

Fractional investing provides the opportunity to purchase and sell fractional portions of assets, as opposed to having to invest in whole share increments or round lots. For instance, when an asset management firm only facilitates trading in whole shares, individuals aiming to invest in Apple stock must commit to $148.00 increments. In contrast, fractional investing empowers investors to acquire smaller portions, like 0.1 shares, for just $14.80. This flexibility allows investors with smaller portfolios to diversify their holdings. It also offers a more cost-effective alternative to acquiring whole shares, making it accessible to individuals with limited access to traditional investment opportunities.

On the other hand, notional trading enables investing in currency-based increments. For example, if an investor wishes to divide $500 between two different instruments, they can invest $250 in each of them, irrespective of the specific quantities involved, which may not be equal. Following executing these orders, the investor will possess fractional amounts of the acquired assets in their portfolio.

Fractional OMS advantages

Investing in fractional and notional quantities means fine-tuned portfolios. With such a capability, asset managers can cater to a broader client base, thus attracting more clients.

Investing in fractional equities also lowers client exposure due to better portfolio diversification and increased precision when allocating funds.

But of course, to implement this, wealth management firms need to upgrade their technology.

Our fractional OMS for asset management

Before rolling out a turnkey fractional OMS, we had a client who approached us with a request for a fractional OMS adjusted to their business. The OMS in question should have supported block orders across multiple asset classes, executed tens of millions of orders in minutes, and needed to integrate with numerous counterparties and the client’s back-office system.

After tackling this project, we’ve built a state-of-the-art fractional OMS based on the acquired experience. Now, it’s available as a product with the following features we’re willing to brag about.

The first feature is an approach to handling orders in fractional and notional quantities without keeping a fractional inventory on the firm’s side. This means no risk exposure.

The workflow is called Route as Received. In this scenario, when you send an order in a fractional or notional quantity to your traders, they route it to an executing destination as is. The latter handles all fractional workflow logistics, and when you get the trade execution back in your order management system, it’s reflected in the fractional or notional quantities accordingly.

The second feature is a pre-allocated block order, which is an order type that helps portfolio managers purchase or sell large quantities of securities executed as a single trade. This one was designed explicitly for RIAs and wealth management institutions that use a consolidation engine to create block orders. This means they can group orders (including those in fractional and notional amounts) before sending them for execution. After such a block order is filled, an OMS allocates quantities to end clients.

This order type works perfectly with the Routed as Received workflow and creates cost savings and operational efficiencies.

The third feature is easy connection to other system components and third-parties. As you can see, in this case study, an OMS is heavily interconnected with numerous systems and venues, so we made its integration efficient through FIX/FAST gateways and flexible APIs (Java, C#, JavaScript, Python, FIX, and REST).

Conclusion

While we respect the wealth management industry’s devotion to voice trading and Excel spreadsheets, we also invite them to take a look at the latest technological developments that might streamline workflows and significantly reduce the chances of human errors.

Also, new generations of investors need to be sure that you’re as technologically advanced as they are.

Whether you’re looking to buy, upgrade, or change your systems, Devexperts will happily help your business with our tried-and-tested technology.

Click here to get in touch with us.

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