The two main products of the investment services side of the UK are TradeFlow and Advantage Fee. What is TradeFlow?
Stephen Inocencio: TradeFlow is an on-premise installed software solution that focuses on post-settlement trade crossing and matching for the security space, and specifically wealth management. Fiserv handles the trade lifecycle from a holistic perspective—order management system data feeds into a robust work flow that will track the entire lifecycle of the trade, whether it’s enrichment, import or data processing, and then the entire matching piece, confirmations and finally settlement.
TradeFlow has a dashboard that you can actually watch the whole lifecycle on, focusing just on the exceptions, you can customise the workflows, and clients like that because those customised workflows allow you to tailor it specifically to their institutions’ needs and where they are crossing.
An additional benefit of being a very robust and efficient risk mitigation system in that trade lifecycle is that they can apply those modules to the type of the business that they have at the time. If it’s just trading for FX or CLS, the user can just look at those trades and as their business grows in volume, they can add modules that that bring in other asset classes or other features at a later point in time.
And Advantage Fee?
John Pfuhler: Advantage Fee is a fee billing automation system that focuses on saving our clients’ money and driving efficiency, specific to looking at client’s revenue leakage.
A lot of our clients realise that once they have automation and their work-flow processes well defined, Advantage Fee keeps that strict process in play throughout the fee-billing lifecycle, so that every revenue leakage scenario can be avoided. They see that very quickly. Again, it’s on an institutional software base, and is also installed on-premise, and we have more than 70 clients globally running it.
Your accurate reconciliation with SWIFT is ready. How is that going?
Pfuhler: That is a big one (and it’s the 13th in a row), because we have introduced support for the 20022 messages for XML standards, supporting clients in their integration of SWIFT MX message content and implementation of Single Euro Payments Area-compliant controls. It’s ongoing support for the SWIFT customer base, and a great way for organisations to further standardise and automate that operational work. The 20022 messages deliver a lot of value around data quality.
Historically, data reconciliation has been quite inconsistent, but what about today?
Pfuhler: I think that the inconsistency in the past has been based a lot around where an organisation was going to make an investment, so there has always been a priority to invest in a revenue-generating side of business. The operations were dealt with as required and you ended up with point solutions, or, it was okay to be manual for a period of time. Now, part of the current wave of the regulation is driving the desire to proactively demonstrate a strong control infrastructure.
At this point in time, to be a competitive force in the market, that control infrastructure is part of the evaluation that a potential customer will go through before it selects you to manage its pension fund, retirement fund or whatever it happens to be.
So you’ll see organisations making much more significant and consistent investments in a lot of these control areas. Reconciliation is the source of a lot of NAV reporting that occurs, so they need to insure the quality of the NAV data, which is absolutely a regulatory mandate. The quality of that data is going to be driven by the quality of the reconciliation.
What kind of regulations are you focusing on?
Pfuhler: The US SEC is going through a series of regulatory changes—or better enforcement of existing regulatory requirements—that are causing everybody to come back and evaluate their internal controls. This includes reconciliation, fraud detection and other middle-office areas such as trade process management. Any place where you can eliminate human touch, get to an automated, rules-based process and implement a complete audit trail around it that gives you transparency into the processes is desirable.
What do you think about the latest FATCA delay?
Pfuhler: We have an AML solution that is very widely used in the market and the US Inland Revenue Service has come out suggesting to the financial services industry that you should look at your AML solution and leverage that to address your FATCA requirements. We are working with some of our customers today to see how we can do that.
What trends you are seeing in the asset management space?
Inocencio: One of the things that we are seeing recently is the growth in the asset classes—I think there has been a big explosion in that space. A lot of it is coming from the changes of Omgeo as well, so as different asset classes come up, firms want to expand and diversify into more than just FX and money markets. Fiserv is putting a lot of focus on increasing the number of asset classes that we offer in modules.
There are 16 asset classes covered currently. We are working with a large client called Bridgewater in the hedge fund space. We have a pilot coming out at the end of this quarter and another one in Q1 where they are actually doing fiscals, cash, repos, and going into physical assets. That’s something that’s new, but we are seeing a lot of clients that are asking about Repos, FX and CLS NDFs as of late. The other area of focus in the industry that we’re still gauging the market and filling out is the global ETC.
Pfuhler: In the back office, on the operational side of things, we are still seeing a heavy push for cost savings, so that manifests itself to us in the adoption of reconciliation products in a centralisation model—taking the reconciliation function and centralising, making a global utility and then almost selling it internally as a service to the rest of the organisation.
That’s also driving a little business-process re-engineering. As firms take these point solutions out there, maybe they are geographically diversified right now, but they are looking towards getting them centralised.
How are the ever-evolving strategies and needs of investors shaping the technology that asset managers require?
Inocencio:That’s an interesting point because there’s a lot that can be going related to types of messaging and standards. People are watching to see what SWIFT is going to do and thinking, ‘if we’re using XML messaging standards today, how do we import that, how do we look at the different type of MT messages coming out, the 4x, 5x series, and so on?’
With something simple, such as XML, people can still interface with a lot of asset servicing providers and managers and they can still do enrichment, so I think that we’re going to see a broader expansion of SWIFT messaging, of capabilities over time, the MT series, and people looking to stay with the tried, true, and simplistic low overhead technologies such as XML message types because the enrichment is so simplistic.
That message type can be expanded very easily without having to learn a big technology stack or difficult tools. One thing that clients really like about our post-trade processing solution, TradeFlow, is that it is message agnostic. We can interface with FPMLs, the XML, Omgeo, SWIFT, and so on.
Pfuhler: As I said before, the institutional investor will absolutely analyse the technology that’s in place in the context of the control infrastructure and validate that their providers have the appropriate controls to provide the reporting that’s required. There is, I think, a much bigger focus on analysing the security and control infrastructure and architecture, and performing an audit, if you will, from time to time during the course of the relationship and making sure that those audit results are correct and complete and would satisfy a regulator.
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