Silver Management Group Inc
Architecting For Growth

In the midst of the chaos of the global financial crisis of 2008, President George W. Bush signed the Emergency Economic Stabilization Act (EESA) which among other provisions required investment brokers to submit cost-basis reporting to both the Internal Revenue Service (IRS) and to their clients, the investors. The multi-year phase-in period for the regulations ends this tax year, and one company that has helped brand-name brokerages meet their regulatory obligations is now poised for rapid growth. Silver Management Group Inc. has begun rolling out non-regulatory features based on capabilities designed in long ago and already this year has landed new large scale engagements with several more well along the sales pipeline.

Silver’s cost-basis and wealth management products utilize a parallel-processing event-driven architecture with a unique stateless/stateful persistence model that addresses the performance and scalability challenges of ever-expanding data sets. The company designed its systems for efficient operations by including detailed processing exceptions, automated reprocessing, real-time status, robust group edit capabilities, and other features such as virtual wash sales and daily period-to-date fee calculations. “These features allow cost-basis operators to work unencumbered by wash sale complexity and wealth operators to address outliers as they occur, not just at period end,” explains Neal Ruskin, managing partner of product at Silver.

As the regulatory phase-in ends, reporting firms are increasingly seeking to leverage compliance data for customer retention and even drive revenue. With this in mind, Silver architected its applications to present every step leading to a particular result and has recently rolled out the first iteration of its Basis Clarity feature. At the click of a mouse, the feature illustrates a tax lot’s entire cost basis lifecycle, from original acquisition through partial disposals, transfers, corporate actions, reclassifications and other adjustments. Next, the company will add graphical and natural language views to provide account holders with explanations that previously required cost basis and tax experts.

“Presenting complex compliance data in easily understandable ways can enhance customer confidence,” says Mr. Ruskin.

After a decade driven by regulatory considerations, we’re now rapidly releasing non-regulatory features based on capabilities we designed in long ago

With an eye always to the future, Silver made sure to productize custom work in order to create a portfolio of capabilities that can be offered to other clients and leveraged to meet future custom requirements. As an example, a large broker dealer with a significant retail brokerage footprint engaged Silver for cost basis processing. The firm also provides corporate services processing for employee stock option programs (ESOP), employee stock purchase programs (ESPP), and restricted stock unit (RSU) programs. The existing system supporting these alternate lines of business could not perform regulatory cost basis processing so needed to be tightly integrated with Silver’s system. The challenge was to match the lots created on the corporate services system, which applies rules outside the broker cost basis reporting regime. Having previously solved similar lot-matching problems, Silver was able to adapt existing technology that met the bulk of the requirements out of the box and ultimately create the firm’s single cost basis book-of-record.

Now that the vast majority of the cost basis compliance work is complete, there is demand for next-generation cost basis and wealth management functionality. Silver has positioned itself to capture this demand by maintaining well thought out technology and product architectures that now enable the company to accelerate development of non-regulatory features for its Cost Basis solution, add advanced automation and customization features to its Portfolio Data and Fee Billing wealth solutions, and build out Insight, its wealth-focused portal and accompanying suite of widgets.