Eric Schultz is not one to make assumptions. The first time the managing member at Reliant Fund Services made an assumption, it culminated in the worst mistake of his career.
“I assumed the limited partnership agreement of their first one and their second one were identical. I didn’t even look at the LPA, and it wound up that there was a totally separate methodology that I totally missed.” he explains. “Luckily, the partner above me caught it and from then on the first thing I always do is read the LPA.”
That early, critical lesson has shaped Schultz and, even three decades into his career, still now checks the LPA first. “I really don’t go into anything unless I fully understand it, I stick to what I’m good at. I don’t want to learn by making mistakes, I have always been very cautious and conservative in terms of my background,” he says.
This attitude has kept Schultz focused on what he knows and what he is good at. Despite a brief stint working on million dollar tax returns that he describes as “the scariest”, Schultz says he “got rid of that practice as quickly as possible and now I just focus on accounting and the fund administration.”
Funds focus
“It was just something that I felt was always challenging, always different types of funds, different types of accounting.” Schultz says of his deep fascination with fund administration.
“I’ve worked on mezzanine funds that are very specific and detailed, and then some private equity funds that only have six investments and can be pretty simple. It’s always constantly challenging.”
However, given his experience in the industry, Schultz has seen it change dramatically — notably in its competitiveness.
He explains: “Last year, I had 20 competitors and now I have four. The whole space has been gobbled up by the bigger fund admins. I consider ourselves a boutique fund administrator. What we are seeing is the big getting bigger and us trying to survive in a space where there’s only a handful of us.”
Schultz and Reliant have had to adapt their tactics and style to remain in the market. “We’re trying to figure out how to stop people just picking a name they recognise and pick a fund admin that’s right for them, right for their size,” he says.
“Our range [for funds] is between US$50 million and US$1 billion because above that, they start having these complex structures that I think are way over our head.
“We focus on that range and we love it. That may sound crazy, but we love the accounting and all the aspects of making sure everything is correct.”
Despite their narrowed focus, Schultz is still witnessing potential clients favouring larger, more reputable fund administrators as opposed to smaller, yet more bespoke, firms.
He claims that “the bigger fund admins don’t want the work we’re doing with the smaller range asset funds. They would rather work on the billion dollar funds, but they will take the US$300 million fund because if they’re going to get paid, why not?
“In this industry, it’s about service reputation and referrals. We’ve never done a client outside of a referral, it’s always come directly from a client or from a service provider that we work with. So for us, it’s all about reputation.”
All in on AI?
“I remember back in the day when I used to work on these 18-column pieces of paper where you had to manually do the adjustments,” Schultz laughs.
“Then Excel came along and even QuickBooks — which a lot of funds still use — but they don’t talk to each other. QuickBooks is the accounting and Excel is all the analytics, all the breakdowns.”
Schultz explains that Reliant uses software that is all in-house and requires a lot fewer manual adjustments. The technology has decreased mistakes and, he says, “decreased the amount of time we need to get our job done and allows us more time to form more analytics on the data.”
As for AI, the industry’s ever-lasting talking point, Schultz does not want to overstate its use in fund administration. “AI is really the way it’s going to work,” he begins.
“But it’s not really on us to worry about AI. It’s really more about capturing the data in real-time and putting it in the right categories and to analyse that data a lot quicker. In the accounting industry, it’s really tough because it is hard to use AI as every fund is different. There is no mirror. You can’t assume anything from client to client.”
He adds that “while technology is great, if you don’t have people that can actually utilise it, it just sits there.
“It’s all about automating the protection and the analytics of the data. I’m curious what happens in the future, but I can’t see it advancing that fast within the accounting industry. But what do I know?”
Apple cards
While the rise of technology has brought a series of positives for the industry, it has also allowed criminals to enhance their methods.
“We are also seeing a lot more bad actors trying to get into the technology, or finding cracks in the technology, and trying to utilise that to get money,” Schultz says.
“I’ve seen situations where the bad actors are amazing at spoofing emails. They’re working just as hard to infiltrate as we are trying to protect it.”
In response, Schultz and Reliant have been training their employees through a series of tests to combat cybercrime. “We’re very careful and test our employees by sending them fake emails constantly and seeing if they fall for it,” he explains.
“If you look quickly, it will look like an email sent from my email address. But, if you actually look at the address properly, it wouldn’t be my email address. It will say something like ‘Hey, can you send me a wire of X amount to my new bank account.’”
Reliant uses Microsoft and Azure to store their data and Schultz is confident that their security is unlikely to be compromised.
He says: “Good luck if they are trying to break into Microsoft.”
Even still, Schultz is trying to instil a degree of proactive awareness of potential scams and phishing as he knows first hand how people can fall for tricks.
“If you are having a bad day, you might actually just do it. I’ve seen it. We had one client who asked their employee to send Apple gift cards, like US$200 Apple cards, and they actually went and bought the cards, handing over the codes. And it is like, ‘Really? You fell for that?’”
Above all though, Schultz stresses diligence. “If you don’t think about it, you might actually just do it. You have to be on guard all day, everyday.”
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