Expanding horizons
12 August 2015
Fund administrator Maitland has chosen Oracle as its technology partner for transfer agency. Anand Ramachandran and Jim Clark talk market evolution, operational efficiency, and old-fashioned customer service
Image: Shutterstock
Maitland and Oracle have recently paired up for transfer agency—what has led up to this?
Jim Clark: Our history in the fund arena is in South Africa, but we’re now expanding to be more international. One of the key products that we offer is transfer agency and, historically, we used a South African platform for that system, but we found that that’s not going to work on a global scale.
One of our philosophies as a business is that we don’t develop technology; we source the best applications already on the market. We did a lot of research and eventually settled on Oracle’s FlexCube system.
Anand Ramachandran: Oracle has been providing technology for global banking and financial services for more than 20 years, including solutions for the transfer agency space. We have already successfully delivered global solutions for large clients in this space, and we have a good market share in South Africa. So, we are the right platform to bring out the value of Maitland’s transfer agency product and we can bring out more value as Maitland makes its transformation, not just in South Africa but internationally.
Why is Maitland expanding now? What’s the significance of the timing?
Clark: There are a couple of reasons. Maitland has a lot of business in South Africa and several product lines, and once any firm feels it’s in good condition in its own market, it’s natural to start looking elsewhere for growth. A lot of our clients in South Africa are doing the same thing, so the timing feels right in that sense.
The second reason is more product-based. We believe that transfer agency is going to become more important to asset managers—and when we’re talking about transfer agency we’re really talking about supporting the distribution of products, which is becoming more complex. More servicing is required and asset managers are starting to look for more consistency, more efficiency and a better service for both the investors buying their products and the distributers selling them.
Global regulations have played a part as well. One of the key regulatory roles we play is in the know-your-client (KYC) and anti-money laundering (AML) validation of clients. It’s political and very high-profile at the moment, so one of our key criteria was to have strong functionality in the technology that would allow our staff to carry out all the checks necessary to meet the increasing level of regulation in this space.
Ramachandran: Some of the large custodian banks that have been dominant in this space in the past have gone in to liquidity or ‘capital crunch’ post-crisis, so a lot of non-bank fund administrators have been presented with an opportunity window as large custodian banks retreat from this space. Meanwhile, some custodian banks are still looking towards the transfer agency business and fund services for an alternative source of prosperity. Asset managers are, to some extent, caught between the kinds of service levels they will get with these banks compared to non-bank administrators such as Maitland.
That is one trend we’re observing now, as well as the recent impact of regional and global regulations in this space, and we believe that the specialists that are more focused on this space tend to deliver better services to asset managers.
Why is transfer agency becoming so much more prevalent in the fund administration space?
Clark: Traditionally, this service was conducted in-house, so I think there is just more interest in outsourcing now, and that requires administrators like us to provide an enhanced service. Asset managers are focusing on their core business—managing money, creating performance, servicing clients and building products—not doing administration. Managers are also increasingly outsourcing those AML-driven regulation processes to reduce some of the risk that comes with that.
Investment in technology continues to grow, and our job as a third-party administrator is to build one infrastructure that many people can use, as opposed to an asset manager building its own structure that can only be used for one thing. When companies see the amount of investment they need to put in to transfer agency to keep up-to-speed with what the market wants and what the regulator wants, it’s daunting, and that’s also increasing the drive towards outsourcing.
Ramachandran: There is another trend emerging from a new paradigm evolving in this space, and that is making everything more customer-centric, focusing on the digital experience you can deliver to the administrator’s clients—the asset managers and the intermediaries—and the end investors. Enabling core processing platforms in the transfer agency back-office is one part of it, but it should also be a good foundation to leapfrog to the next-generation digital experience, enabling self-service capabilities for asset managers, intermediaries and investors, for example.
In the next few years, there may be a point where older legacy platforms will have bottlenecks, and may not be able to provide the new services available on the market. Transfer agents must have the scale to expand proportionally with their clients, and to do this they have to be forward-looking. They can’t be using technology that’s two decades old.
Clark: These days, a lot of technology and services are very product-specific. Firms might have one system for a unit trust, one for supporting a pension fund, one for a retirement annuity, one for a hedge fund, and so on. They’re all different systems doing different things, each with a different customer experience.
It can be very fragmented, but now asset managers want a single platform that allows them to sell their investors a consistent experience, so whether a client buys their investment story through a unit trust, a tax wrapper, or a pension fund, the asset manager wants to give their investor the same experience.
How important is it for the technology to be flexible?
Clark: It’s very important—hence the title FlexCube—but its not just about the technology. Given that the asset manager is creating the product, it’s important to be flexible in terms of the product they choose to sell to the market, and in creating a consistent service. Asset managers want to sell as many products to as many investors as they can, and they want to offer a range of simple and complex products. There’s a demand now for them to provide a consolidated service across all those products, instead of a fragmented one.
Ramachandran: Another aspect is that many of the transfer agency providers carry multiple core platforms and therefore they have many satellite services around those platforms. Operational efficiency is reduced, client experience is fragmented and transfer agency becomes a drag on a business already running on very thin margins. That then affects customer service; it becomes a double-edged sword.
The more efficient companies can be in terms of what they can process on a common platform, the better service they can deliver to their customers. Only then can they start winning additional business and growing their footprint. The time has come for a consolidated common platform, irrespective of product lines, market, or currency.
A single platform delivering next-generation client experience with enhanced operational efficiency really takes transfer agency services to next level of maturity.
Clark: Keeping clients happy is the key to any business, and I think transfer agency is often regarded as a process and a function. Part of the maturing of this aspect of the industry is a move to thinking about the client experience rather than pure processing.
There is, of course, a commercial angle too—we believe that this is a space we could do very well in. The first part of growth is having the best possible core system, and the starting point for us is finding the right partner for that core system. That is exactly what we’ve done with Oracle.
Jim Clark: Our history in the fund arena is in South Africa, but we’re now expanding to be more international. One of the key products that we offer is transfer agency and, historically, we used a South African platform for that system, but we found that that’s not going to work on a global scale.
One of our philosophies as a business is that we don’t develop technology; we source the best applications already on the market. We did a lot of research and eventually settled on Oracle’s FlexCube system.
Anand Ramachandran: Oracle has been providing technology for global banking and financial services for more than 20 years, including solutions for the transfer agency space. We have already successfully delivered global solutions for large clients in this space, and we have a good market share in South Africa. So, we are the right platform to bring out the value of Maitland’s transfer agency product and we can bring out more value as Maitland makes its transformation, not just in South Africa but internationally.
Why is Maitland expanding now? What’s the significance of the timing?
Clark: There are a couple of reasons. Maitland has a lot of business in South Africa and several product lines, and once any firm feels it’s in good condition in its own market, it’s natural to start looking elsewhere for growth. A lot of our clients in South Africa are doing the same thing, so the timing feels right in that sense.
The second reason is more product-based. We believe that transfer agency is going to become more important to asset managers—and when we’re talking about transfer agency we’re really talking about supporting the distribution of products, which is becoming more complex. More servicing is required and asset managers are starting to look for more consistency, more efficiency and a better service for both the investors buying their products and the distributers selling them.
Global regulations have played a part as well. One of the key regulatory roles we play is in the know-your-client (KYC) and anti-money laundering (AML) validation of clients. It’s political and very high-profile at the moment, so one of our key criteria was to have strong functionality in the technology that would allow our staff to carry out all the checks necessary to meet the increasing level of regulation in this space.
Ramachandran: Some of the large custodian banks that have been dominant in this space in the past have gone in to liquidity or ‘capital crunch’ post-crisis, so a lot of non-bank fund administrators have been presented with an opportunity window as large custodian banks retreat from this space. Meanwhile, some custodian banks are still looking towards the transfer agency business and fund services for an alternative source of prosperity. Asset managers are, to some extent, caught between the kinds of service levels they will get with these banks compared to non-bank administrators such as Maitland.
That is one trend we’re observing now, as well as the recent impact of regional and global regulations in this space, and we believe that the specialists that are more focused on this space tend to deliver better services to asset managers.
Why is transfer agency becoming so much more prevalent in the fund administration space?
Clark: Traditionally, this service was conducted in-house, so I think there is just more interest in outsourcing now, and that requires administrators like us to provide an enhanced service. Asset managers are focusing on their core business—managing money, creating performance, servicing clients and building products—not doing administration. Managers are also increasingly outsourcing those AML-driven regulation processes to reduce some of the risk that comes with that.
Investment in technology continues to grow, and our job as a third-party administrator is to build one infrastructure that many people can use, as opposed to an asset manager building its own structure that can only be used for one thing. When companies see the amount of investment they need to put in to transfer agency to keep up-to-speed with what the market wants and what the regulator wants, it’s daunting, and that’s also increasing the drive towards outsourcing.
Ramachandran: There is another trend emerging from a new paradigm evolving in this space, and that is making everything more customer-centric, focusing on the digital experience you can deliver to the administrator’s clients—the asset managers and the intermediaries—and the end investors. Enabling core processing platforms in the transfer agency back-office is one part of it, but it should also be a good foundation to leapfrog to the next-generation digital experience, enabling self-service capabilities for asset managers, intermediaries and investors, for example.
In the next few years, there may be a point where older legacy platforms will have bottlenecks, and may not be able to provide the new services available on the market. Transfer agents must have the scale to expand proportionally with their clients, and to do this they have to be forward-looking. They can’t be using technology that’s two decades old.
Clark: These days, a lot of technology and services are very product-specific. Firms might have one system for a unit trust, one for supporting a pension fund, one for a retirement annuity, one for a hedge fund, and so on. They’re all different systems doing different things, each with a different customer experience.
It can be very fragmented, but now asset managers want a single platform that allows them to sell their investors a consistent experience, so whether a client buys their investment story through a unit trust, a tax wrapper, or a pension fund, the asset manager wants to give their investor the same experience.
How important is it for the technology to be flexible?
Clark: It’s very important—hence the title FlexCube—but its not just about the technology. Given that the asset manager is creating the product, it’s important to be flexible in terms of the product they choose to sell to the market, and in creating a consistent service. Asset managers want to sell as many products to as many investors as they can, and they want to offer a range of simple and complex products. There’s a demand now for them to provide a consolidated service across all those products, instead of a fragmented one.
Ramachandran: Another aspect is that many of the transfer agency providers carry multiple core platforms and therefore they have many satellite services around those platforms. Operational efficiency is reduced, client experience is fragmented and transfer agency becomes a drag on a business already running on very thin margins. That then affects customer service; it becomes a double-edged sword.
The more efficient companies can be in terms of what they can process on a common platform, the better service they can deliver to their customers. Only then can they start winning additional business and growing their footprint. The time has come for a consolidated common platform, irrespective of product lines, market, or currency.
A single platform delivering next-generation client experience with enhanced operational efficiency really takes transfer agency services to next level of maturity.
Clark: Keeping clients happy is the key to any business, and I think transfer agency is often regarded as a process and a function. Part of the maturing of this aspect of the industry is a move to thinking about the client experience rather than pure processing.
There is, of course, a commercial angle too—we believe that this is a space we could do very well in. The first part of growth is having the best possible core system, and the starting point for us is finding the right partner for that core system. That is exactly what we’ve done with Oracle.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
.jpg)