Managing an evolution
05 November 2014
Societe Generale Securities Services UK introduces its new wealth and investment management outsourcing solution
Image: Shutterstock
The wealth management industry in the UK has been subject to an unprecedented level of change over the past five years. Aimed at mid-tier wealth and investment fund managers, Societe Generale Securities Services (SGSS) has launched a fully integrated wealth and investment management outsourcing solution for the UK to complement its existing securities and funds services businesses, spanning the full post-trade value-chain, from global execution to global custody.
With increasing regulatory change such as the Retail Distribution Review, Foreign Account Tax Compliance Act and a heightened focus from the regulators on suitability and client assets, it is sensible to expect there to be some significant changes to the way that wealth managers do business now and in the future. The increased regulatory pressure is forcing managers to reform their front-office processes, segment their client base and, more significantly, it has given rise to a need for more efficient business operations to support different levels of client service and to implement better controls.
It is easy to view these challenges as a negative cost and burden on the wealth industry but the truth is the wealth management segment is fast growing with wealth and institutional managers securing significant new investment when compared to traditional long-only funds.
Investor needs are fundamentally changing, driven on the retail front by the looming retirement of the biggest demographic wave in history, and on the institutional side by a combination of worsening pension deficits and a significantly different approach to evaluating and paying for performance.
This is taking place amid an uncertain market environment that is breeding enormous levels of anxiety among investors.
Mid-tier wealth and investment fund managers are increasingly faced with the costs associated with constant regulatory change and operational developments. To remain competitive, managers are increasingly looking to outsource their operational functions, leverage providers to reduce costs associated with maintaining back-office systems and integrate web and front-end functionality to future proof their services.
As a result, SGSS has developed a true front-to-back-office wealth management solution in the UK to provide a unique best of breed portfolio management platform in partnership with JHC Systems, specialists in IT solutions for investment managers and stock brokers.
A beneficial solution
Wealth managers will benefit from access to a ‘tailored turnkey solution’ from wealth to fund services and associated banking services. The service and unique proposition comprises a consolidated service provision supporting integrated execution services and liquidity support, middle- and back-office services, segregated portfolio processing, master books and records, clearing and settlement processing across multi-products, global settlement and local custody with multi-currency capabilities, and fund administration services.
Additional ancillary services include foreign exchange services, liquidity and securities lending, asset servicing and reporting services, as well as risk and regulatory reporting.
Mid-tier wealth and investment managers, private banks, direct dealing/broking firms and advisory firms will benefit from a reduction in key operational, cost, risk and an increase in time benefits by subscribing to this outsourcing solution. As a result, they can be more end-investor orientated and focus budgets and management time on client facing duties and functions, enhancing their competitive positioning as a result.
These managers use fund and non-fund structures, but increasingly the underlying end-investor records are required to be held in the form of segregated or managed account structures.
“The new way in which money is managed has altered significantly, aligned with the new definition of performance that incorporates risk management, income generation, and alpha/beta separation, increasingly retail investors are becoming much more institutionalised,” comments Michael Le Garignon, head of business development, sales and relationship management in the UK at SGSS.
Those investment managers that expand the definition of ‘asset class’ by marketing specific outcomes, such as target retirement dates, tax minimisation and income generation, will become tomorrow’s winners. Average annual growth rates among ‘outcome-oriented funds’ have been twice that of traditional long-only funds in recent years.
The structures these managers utilise are not that different to traditional long-only funds, however, one specific area of note is the use of pooled vehicles to amass client investment. Typical types of investors are pensions, charities, trusts, foundations, as well as private HNW individuals and family offices.
“We aim to be a key partner to our clients,” comments Le Garignon. “SGSS has designed a fully integrated, white-labelled front-to-back solution with a competitive and client-aligned pricing strategy to ensure it represents good value, a partnership that enables growth for our clients. By doing so, we provide our clients with important operational efficiencies as well as significant new business opportunities to stay ahead of the competition as the industry continues to evolve in response to regulatory and structural changes.”
“By combining the platform capabilities with the securities services and fund services capabilities globally, SGSS is delivering a solution that will allow managers to adapt their operations to cope with scale through future proofing their operating and front office, while minimising their cost base throughout their middle- and back-office functions.”
Compelling solutions
To complement buy-side solutions, SGSS is in the process of launching a range of new solutions with a specific focus on the wholesale sell-side industry, ie, independent institutional brokers. These firms have to deal with a developing range of industry, regulatory, capital and operational challenges.
Today, these firms can source a range of services, such as research, execution, agency clearing and settlement, hosted back-office systems and full middle-back-office outsourcing, from a multitude of third party providers. This is known as the ‘broker-dealer outsource’ model.
By bringing together the strengths of SGSS, Societe Generale Corporate & Investment Banking and Newedge in the recently set-up Societe Generale Global Banking & Investor Solutions division, SGSS aims to develop scalable innovative solutions for mid-tier brokers, in effect delivering mid-tier firms the benefit of a global financial organisation and a significant investment programme while being able to support their business on a purpose built platform coupled to a strong commitment to service.
“Partnering our clients, delivering integrated solutions and enabling our clients to grow their business goes beyond investment in our teams, technology, and our organisation. It is about investing in our clients and the key relationships that are at the core of what makes the industry so strong,” says Jason Nabi, head of the financial institutions and banks segment and broker-dealer outsourcing at SGSS.
In addition to its existing services within the UK, SGSS has also set up a trustee and depositary services business. The business will work with asset managers to help them manage regulatory change and ensure a smooth transition to the Alternative Investment Fund Managers Directive and UCITS V regimes.
Both regimes represent a step change for the asset management industry and the aim of the new business is to work in helping UK managers adapt to these new regimes with proactive regulatory guidance, leveraging a range of innovative products from within the existing global business.
With increasing regulatory change such as the Retail Distribution Review, Foreign Account Tax Compliance Act and a heightened focus from the regulators on suitability and client assets, it is sensible to expect there to be some significant changes to the way that wealth managers do business now and in the future. The increased regulatory pressure is forcing managers to reform their front-office processes, segment their client base and, more significantly, it has given rise to a need for more efficient business operations to support different levels of client service and to implement better controls.
It is easy to view these challenges as a negative cost and burden on the wealth industry but the truth is the wealth management segment is fast growing with wealth and institutional managers securing significant new investment when compared to traditional long-only funds.
Investor needs are fundamentally changing, driven on the retail front by the looming retirement of the biggest demographic wave in history, and on the institutional side by a combination of worsening pension deficits and a significantly different approach to evaluating and paying for performance.
This is taking place amid an uncertain market environment that is breeding enormous levels of anxiety among investors.
Mid-tier wealth and investment fund managers are increasingly faced with the costs associated with constant regulatory change and operational developments. To remain competitive, managers are increasingly looking to outsource their operational functions, leverage providers to reduce costs associated with maintaining back-office systems and integrate web and front-end functionality to future proof their services.
As a result, SGSS has developed a true front-to-back-office wealth management solution in the UK to provide a unique best of breed portfolio management platform in partnership with JHC Systems, specialists in IT solutions for investment managers and stock brokers.
A beneficial solution
Wealth managers will benefit from access to a ‘tailored turnkey solution’ from wealth to fund services and associated banking services. The service and unique proposition comprises a consolidated service provision supporting integrated execution services and liquidity support, middle- and back-office services, segregated portfolio processing, master books and records, clearing and settlement processing across multi-products, global settlement and local custody with multi-currency capabilities, and fund administration services.
Additional ancillary services include foreign exchange services, liquidity and securities lending, asset servicing and reporting services, as well as risk and regulatory reporting.
Mid-tier wealth and investment managers, private banks, direct dealing/broking firms and advisory firms will benefit from a reduction in key operational, cost, risk and an increase in time benefits by subscribing to this outsourcing solution. As a result, they can be more end-investor orientated and focus budgets and management time on client facing duties and functions, enhancing their competitive positioning as a result.
These managers use fund and non-fund structures, but increasingly the underlying end-investor records are required to be held in the form of segregated or managed account structures.
“The new way in which money is managed has altered significantly, aligned with the new definition of performance that incorporates risk management, income generation, and alpha/beta separation, increasingly retail investors are becoming much more institutionalised,” comments Michael Le Garignon, head of business development, sales and relationship management in the UK at SGSS.
Those investment managers that expand the definition of ‘asset class’ by marketing specific outcomes, such as target retirement dates, tax minimisation and income generation, will become tomorrow’s winners. Average annual growth rates among ‘outcome-oriented funds’ have been twice that of traditional long-only funds in recent years.
The structures these managers utilise are not that different to traditional long-only funds, however, one specific area of note is the use of pooled vehicles to amass client investment. Typical types of investors are pensions, charities, trusts, foundations, as well as private HNW individuals and family offices.
“We aim to be a key partner to our clients,” comments Le Garignon. “SGSS has designed a fully integrated, white-labelled front-to-back solution with a competitive and client-aligned pricing strategy to ensure it represents good value, a partnership that enables growth for our clients. By doing so, we provide our clients with important operational efficiencies as well as significant new business opportunities to stay ahead of the competition as the industry continues to evolve in response to regulatory and structural changes.”
“By combining the platform capabilities with the securities services and fund services capabilities globally, SGSS is delivering a solution that will allow managers to adapt their operations to cope with scale through future proofing their operating and front office, while minimising their cost base throughout their middle- and back-office functions.”
Compelling solutions
To complement buy-side solutions, SGSS is in the process of launching a range of new solutions with a specific focus on the wholesale sell-side industry, ie, independent institutional brokers. These firms have to deal with a developing range of industry, regulatory, capital and operational challenges.
Today, these firms can source a range of services, such as research, execution, agency clearing and settlement, hosted back-office systems and full middle-back-office outsourcing, from a multitude of third party providers. This is known as the ‘broker-dealer outsource’ model.
By bringing together the strengths of SGSS, Societe Generale Corporate & Investment Banking and Newedge in the recently set-up Societe Generale Global Banking & Investor Solutions division, SGSS aims to develop scalable innovative solutions for mid-tier brokers, in effect delivering mid-tier firms the benefit of a global financial organisation and a significant investment programme while being able to support their business on a purpose built platform coupled to a strong commitment to service.
“Partnering our clients, delivering integrated solutions and enabling our clients to grow their business goes beyond investment in our teams, technology, and our organisation. It is about investing in our clients and the key relationships that are at the core of what makes the industry so strong,” says Jason Nabi, head of the financial institutions and banks segment and broker-dealer outsourcing at SGSS.
In addition to its existing services within the UK, SGSS has also set up a trustee and depositary services business. The business will work with asset managers to help them manage regulatory change and ensure a smooth transition to the Alternative Investment Fund Managers Directive and UCITS V regimes.
Both regimes represent a step change for the asset management industry and the aim of the new business is to work in helping UK managers adapt to these new regimes with proactive regulatory guidance, leveraging a range of innovative products from within the existing global business.
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