Tools, not technology
25 May 2022
How can transfer agents overcome the complex challenges they face and grow their business? The vendor community’s typical response is to roll out more new technology, but that is only part of the answer, outlines Deep Pool’s chief revenue officer, Roger Woolman
Image: Deep Pool
Cutting-edge technology has its place. A vendor’s real value comes through when they focus on delivering effective tools.
True innovation lies in solving problems, using technology not for its own sake but to provide real answers to real world issues.
Everybody’s talking about digital
Digitalisation is a case in point. Digitalising the client experience has become a competitive necessity for fund administrators. Investors increasingly expect rich, multi-functional digital engagements that allow them to make decisions, interact with their investment manager, examine research and offer documents, and view information when they want it.
For investment managers, an integrated, digitalised environment offers real-time insights into their marketing, fundraising and client servicing processes, as well as lessons that can help improve client relationships.
In turn, administrators benefit from end-to-end workflows that aid efficient data capture and dissemination, and enhance control over the communications sent to their investment manager clients.
But how many asset servicers have initiated digitalisation projects and rolled out portal solutions only for them to go largely unused, or be restricted to glorified information hubs? In many cases, the digital offering lacks the specific capabilities different user groups want to see. A pretty front-end without proper service support behind it offers little value.
The emphasis instead must be on delivering seamless functionality that makes users’ lives easier, for example client onboarding.
Many onboarding steps – from completing applications to capturing client risk profiles and conducting anti-money laundering/know-your-customer checks – remain paper-based and highly manual, making account set-up processes tedious and error prone.
Investor onboarding teams must perform hundreds of manual tasks every day to verify the identity and assess the risk and suitability of every new customer. Typically, that involves numerous back-and-forth interactions between investment manager and client, with employees needing to re-key the same data into multiple systems and spreadsheets.
What clients want is an integrated digital solution with self-servicing capabilities, that provides access to customised and digitised fund subscription documents.
They also want key investor information documents and fund reports, and the capabilities to upload their data securely, when they want, via their device of choice.
The result will be faster, simpler, more robust and compliant investor onboarding that improves the customer experience and engagement, enhances risk control and drives firms’ internal operating efficiencies.
The long road to automation
End-to-end automation – a long-held but still unrealised ambition in the fund administration world – is another priority.
Tightening margins demand ever-greater efficiencies if administrators are to maintain their profitability.
Automated, systematic processes also reduce firms’ operational and financial risks, and deliver much-needed scalability to help them grow.
Automation has become even more important in an era of tight labour markets and the “Great Resignation”. Fund administration is a skilled business dependent on expert staff. Strategies to recruit and retain quality people – by offering flexible, digitally-enabled working arrangements – are one solution.
Technology-driven automation can help further by replacing manual-heavy processes, alleviating firms’ staffing constraints and diminishing the associated key person risks.
Relieved of onerous, often repetitive tasks, staff can focus on more engaging, value-adding activities that make a real competitive difference. Employee satisfaction improves, making staff want to stay for longer.
Multi-asset class demands
Multi-asset class support is an additional imperative. Years of anaemic bond yields and stretched equity valuations have driven investors into a wider range of asset classes (particularly alternative). Hedge fund assets now top US$4 trillion and are predicted to hit US$5.44 trillion in 2026.
Private equity and venture capital funds continue to raise record amounts. Private equity is forecast to soar from US$5.33 trillion in 2021 to US$11.12 trillion by 2026. Investor interest in crypto assets, cryptocurrency-denominated funds and blockchain-based security tokens is spreading too.
This changing investment landscape offers fund administrators, with the right mix of investor servicing capabilities, an opportunity to expand their offerings and support a wider range of clients. Yet firms’ system environments often fall short. Rather than a unified infrastructure delivering seamless services across multiple asset classes, firms typically contend with a fragmented jumble of asset-specific transfer agency (TA) platforms.
Such system duplication comes at a cost. Each TA application has a licensing fee. They require server space, plus a team of IT support and subject matter experts to run and maintain the software, adding headcount and key person risk — burdens administrators can ill-afford as they wrestle with intense and sustained margin compression. Consolidating systems onto an integrated platform with cross-asset class capabilities eliminates much of that cost and risk.
As interest and investment in digital assets ramps up, transfer agents also face the prospect of dual on- and off-chain environments existing in parallel, another complexity they will need to support.
To handle funds denominated in cryptocurrencies or that invest in crypto assets requires systems with the architectural flexibility to support longer strings of decimal places.
Plus firms need the ability to handle different settlement processes and reporting currencies, and potentially mirror what happens in a distributed ledger, employing smart contracts in a more traditional accounting system.
Data consistency and consolidation
A fragmented infrastructure using multiple systems to run different parts of the investor servicing business creates an additional problem: siloed data.
Data feeds and system integrations proliferate, adding cost and complexity. Data management and reconciliation to ensure cross-enterprise consistency becomes a huge undertaking.
In an effort to create a single source of the truth, many fund administrators have implemented data warehouses to sit above the TA applications. The disparate systems then feed the warehouse with all the investor data relating to the funds they service. While helping address firms’ data consistency and reporting challenges, a data warehouse introduces an additional cost. It also magnifies the risk that some part of the process will fall down.
Keeping the data warehouse and underlying systems up-to-date to extract the most value possible from the available functionality also takes significant ongoing resources — investments that administrators can ill-afford to neglect.
Not staying current with the latest functionality makes it harder for firms to cope with market changes and clients’ service demands. Operational risks creep in. Passing consultants’ and prospects’ due diligence examinations becomes more difficult. Competitiveness suffers.
The answer is to consolidate the systems onto an integrated, multi-asset class TA platform. A unified environment will provide the golden data source administrators crave, while eradicating the challenges that an extra data layer brings.
Workflow
Integrated technology solutions that can alleviate fund administrators’ manual workloads, drive digital service delivery and foster consistent end-to-end data flows have become indispensable. But optimising operating efficiencies, client support and regulatory compliance takes something more: effective workflow management to bring it all together.
Granular, rules-based workflows smooth firms’ processes by triggering a series of automated steps for any kind of repeatable activity. Workflows expedite the assignment and fulfilment of processing tasks, increasing teams’ efficiency and productivity.
Intelligent business process management tools can consolidate and control document inflows, enable administrators to share documents and data and accept updates in a controlled fashion.
They can also automate message and approval capture where it is required. Slick, multi-functional digital experiences in particular rely on workflows to allow the smooth end-to-end, two-way flow of data that is so integral to digitalisation.
Having a flexible rules engine allows fund administrators to design customisable step-by-step workflows, create deliverable service level agreements for each client, and build robust controls around each process. In the same way, workflows can be used to systematise adherence to fund and regulatory compliance rules and reporting requirements.
Workflows also provide valuable transparency and accountability for user actions. Through a real-time dashboard, teams can track and query all the firm’s daily processing activities, and identify any problems and bottlenecks so they can better meet key performance indicators.
For example, if the net asset value (NAV) preparation is internally outsourced, the administrator can track the workflow in those outsourced locations and incorporate various levels of approval before the NAV is sent to the investment manager for sign off.
Where some form of manual intervention is required, automatically routing tasks to relevant teams for them to complete will speed up processing and foster higher quality results.
All communications and amendments can be tracked to create a robust audit trail.
Innovation partners
What should drive innovation? The application of technology to real-world challenges and opportunities to produce a radical beneficial impact.
Such result-led innovation demands advanced software engineering skills.
But technology expertise must be married with deep experience and knowledge of investor servicing, and the everyday challenges transfer agents face, to ensure all systems development is directed where it counts.
And those systems need to be fully employed. Ensuring staff optimise use of available solutions, to extract the most benefit from the technology capabilities, is all too commonly neglected.
Partnering with an expert vendor with the right mix of quality people, resources, consulting support and vision removes the innovation burden from fund administrators’ shoulders. With the right solutions, used well, fund administrators can focus on delivering the quality services clients want.
True innovation lies in solving problems, using technology not for its own sake but to provide real answers to real world issues.
Everybody’s talking about digital
Digitalisation is a case in point. Digitalising the client experience has become a competitive necessity for fund administrators. Investors increasingly expect rich, multi-functional digital engagements that allow them to make decisions, interact with their investment manager, examine research and offer documents, and view information when they want it.
For investment managers, an integrated, digitalised environment offers real-time insights into their marketing, fundraising and client servicing processes, as well as lessons that can help improve client relationships.
In turn, administrators benefit from end-to-end workflows that aid efficient data capture and dissemination, and enhance control over the communications sent to their investment manager clients.
But how many asset servicers have initiated digitalisation projects and rolled out portal solutions only for them to go largely unused, or be restricted to glorified information hubs? In many cases, the digital offering lacks the specific capabilities different user groups want to see. A pretty front-end without proper service support behind it offers little value.
The emphasis instead must be on delivering seamless functionality that makes users’ lives easier, for example client onboarding.
Many onboarding steps – from completing applications to capturing client risk profiles and conducting anti-money laundering/know-your-customer checks – remain paper-based and highly manual, making account set-up processes tedious and error prone.
Investor onboarding teams must perform hundreds of manual tasks every day to verify the identity and assess the risk and suitability of every new customer. Typically, that involves numerous back-and-forth interactions between investment manager and client, with employees needing to re-key the same data into multiple systems and spreadsheets.
What clients want is an integrated digital solution with self-servicing capabilities, that provides access to customised and digitised fund subscription documents.
They also want key investor information documents and fund reports, and the capabilities to upload their data securely, when they want, via their device of choice.
The result will be faster, simpler, more robust and compliant investor onboarding that improves the customer experience and engagement, enhances risk control and drives firms’ internal operating efficiencies.
The long road to automation
End-to-end automation – a long-held but still unrealised ambition in the fund administration world – is another priority.
Tightening margins demand ever-greater efficiencies if administrators are to maintain their profitability.
Automated, systematic processes also reduce firms’ operational and financial risks, and deliver much-needed scalability to help them grow.
Automation has become even more important in an era of tight labour markets and the “Great Resignation”. Fund administration is a skilled business dependent on expert staff. Strategies to recruit and retain quality people – by offering flexible, digitally-enabled working arrangements – are one solution.
Technology-driven automation can help further by replacing manual-heavy processes, alleviating firms’ staffing constraints and diminishing the associated key person risks.
Relieved of onerous, often repetitive tasks, staff can focus on more engaging, value-adding activities that make a real competitive difference. Employee satisfaction improves, making staff want to stay for longer.
Multi-asset class demands
Multi-asset class support is an additional imperative. Years of anaemic bond yields and stretched equity valuations have driven investors into a wider range of asset classes (particularly alternative). Hedge fund assets now top US$4 trillion and are predicted to hit US$5.44 trillion in 2026.
Private equity and venture capital funds continue to raise record amounts. Private equity is forecast to soar from US$5.33 trillion in 2021 to US$11.12 trillion by 2026. Investor interest in crypto assets, cryptocurrency-denominated funds and blockchain-based security tokens is spreading too.
This changing investment landscape offers fund administrators, with the right mix of investor servicing capabilities, an opportunity to expand their offerings and support a wider range of clients. Yet firms’ system environments often fall short. Rather than a unified infrastructure delivering seamless services across multiple asset classes, firms typically contend with a fragmented jumble of asset-specific transfer agency (TA) platforms.
Such system duplication comes at a cost. Each TA application has a licensing fee. They require server space, plus a team of IT support and subject matter experts to run and maintain the software, adding headcount and key person risk — burdens administrators can ill-afford as they wrestle with intense and sustained margin compression. Consolidating systems onto an integrated platform with cross-asset class capabilities eliminates much of that cost and risk.
As interest and investment in digital assets ramps up, transfer agents also face the prospect of dual on- and off-chain environments existing in parallel, another complexity they will need to support.
To handle funds denominated in cryptocurrencies or that invest in crypto assets requires systems with the architectural flexibility to support longer strings of decimal places.
Plus firms need the ability to handle different settlement processes and reporting currencies, and potentially mirror what happens in a distributed ledger, employing smart contracts in a more traditional accounting system.
Data consistency and consolidation
A fragmented infrastructure using multiple systems to run different parts of the investor servicing business creates an additional problem: siloed data.
Data feeds and system integrations proliferate, adding cost and complexity. Data management and reconciliation to ensure cross-enterprise consistency becomes a huge undertaking.
In an effort to create a single source of the truth, many fund administrators have implemented data warehouses to sit above the TA applications. The disparate systems then feed the warehouse with all the investor data relating to the funds they service. While helping address firms’ data consistency and reporting challenges, a data warehouse introduces an additional cost. It also magnifies the risk that some part of the process will fall down.
Keeping the data warehouse and underlying systems up-to-date to extract the most value possible from the available functionality also takes significant ongoing resources — investments that administrators can ill-afford to neglect.
Not staying current with the latest functionality makes it harder for firms to cope with market changes and clients’ service demands. Operational risks creep in. Passing consultants’ and prospects’ due diligence examinations becomes more difficult. Competitiveness suffers.
The answer is to consolidate the systems onto an integrated, multi-asset class TA platform. A unified environment will provide the golden data source administrators crave, while eradicating the challenges that an extra data layer brings.
Workflow
Integrated technology solutions that can alleviate fund administrators’ manual workloads, drive digital service delivery and foster consistent end-to-end data flows have become indispensable. But optimising operating efficiencies, client support and regulatory compliance takes something more: effective workflow management to bring it all together.
Granular, rules-based workflows smooth firms’ processes by triggering a series of automated steps for any kind of repeatable activity. Workflows expedite the assignment and fulfilment of processing tasks, increasing teams’ efficiency and productivity.
Intelligent business process management tools can consolidate and control document inflows, enable administrators to share documents and data and accept updates in a controlled fashion.
They can also automate message and approval capture where it is required. Slick, multi-functional digital experiences in particular rely on workflows to allow the smooth end-to-end, two-way flow of data that is so integral to digitalisation.
Having a flexible rules engine allows fund administrators to design customisable step-by-step workflows, create deliverable service level agreements for each client, and build robust controls around each process. In the same way, workflows can be used to systematise adherence to fund and regulatory compliance rules and reporting requirements.
Workflows also provide valuable transparency and accountability for user actions. Through a real-time dashboard, teams can track and query all the firm’s daily processing activities, and identify any problems and bottlenecks so they can better meet key performance indicators.
For example, if the net asset value (NAV) preparation is internally outsourced, the administrator can track the workflow in those outsourced locations and incorporate various levels of approval before the NAV is sent to the investment manager for sign off.
Where some form of manual intervention is required, automatically routing tasks to relevant teams for them to complete will speed up processing and foster higher quality results.
All communications and amendments can be tracked to create a robust audit trail.
Innovation partners
What should drive innovation? The application of technology to real-world challenges and opportunities to produce a radical beneficial impact.
Such result-led innovation demands advanced software engineering skills.
But technology expertise must be married with deep experience and knowledge of investor servicing, and the everyday challenges transfer agents face, to ensure all systems development is directed where it counts.
And those systems need to be fully employed. Ensuring staff optimise use of available solutions, to extract the most benefit from the technology capabilities, is all too commonly neglected.
Partnering with an expert vendor with the right mix of quality people, resources, consulting support and vision removes the innovation burden from fund administrators’ shoulders. With the right solutions, used well, fund administrators can focus on delivering the quality services clients want.
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