Brad Kuhlin and Bob Clancy formed Vertical Management Systems (VMS) in Glendale, California in 1992. The pair decided early on that they would focus exclusively on one niche within the financial services industry, and become masters of it. Their niche was automating mutual fund-related back-office processes for trust companies and recordkeepers. At the time, mutual funds were just coming into vogue, and they were very problematic to deal with. VMS’s first client, North American Trust Company in San Diego, needed a custom-built recordkeeping system that was highly dependent on holding mutual funds.
That first job launched VMS as a technology innovator and resulted in additional custom engagements over the next 10 years in the retirement and trust space with firms like Charles Schwab, Wells Fargo and SEI. These engagements provided the knowledge for the creation of the Mutual Fund Desk (MFD) and Specialized Information Services (SIS) products. Both products were built with a focus on full transparency and flexible integration that could be adapted to the various technological infrastructures and continually evolving rules and regulations in the financial services space.
This experience would prove timely when, in 2006, after reviewing the release of the Pension Protection Act in Congress, Bob and Brad foresaw two fundamental market issues that would hinder the Act’s effectiveness, due to the current technology infrastructure in the retirement space:
- Regardless of the intent of the Act, participants would have limited choices when it came to investment selection and access to proper investment advice. This was due to technology limitations, and the inability of recordkeeping systems to perform securities processing like trust and brokerage systems do.
- Current recordkeeping systems fundamentally lacked the ability to hold cash as a form of property for individual participants. This prevented them from being able to transparently account for participant expenses. It also interfered with easily adding additional investment types to plans, and prevented the ability to trade real-time during the business day, when securities markets were open.