Jon Willis

Jon Willis of Calastone explains how finding new uses for old systems can mean more readily available, and thriftier, solutions

How did the Calastone Transfer Service come about?

When our clients looked at what they actually needed from a transfer solution, they realised they didn’t necessarily need, for example, the indemnities through the TISA Exchange that the contract club delivers, or the full re-registration disclosure message structure. All they really wanted was to get the assets moved electronically.

Typically, the two parties would have a conversation—the firm that was losing the client would make contact to ensure that’s what they wanted, and once everyone was in agreement, they would manually send stock transfer forms to the fund managers, who would move the assets. It was obvious that there could be benefits to automating this process.
We looked at the products we already had and reused some of our existing messaging structures, as we knew clients were already equipped to receive in those formats.

We then created a very simple matching solution. It allows each of the nominees to allege a transfer against the other, and when it is accepted, a match transfer is automatically created.

Off the back of that we create a compliant ISO 20022 stock transfer message, which is sent to the fund manager via the transfer agent, and which looks the same, and does the same job, as the re-registration stock transfer message. Re-using the message-set in the back office allowed us to create a very simple transfer-matching engine that allows input from both parties at the front end.
The technology allows us to help the segment of the community who wanted to automate and reduce risk, and wanted to improve the timescale on delivery, but who were finding themselves up against an industry re-registration system that was overly complex for their needs.

We found we could re-use elements of the back office to get those clients involved with straight-through processing and automation, and all of the benefits that come with that.

The aim was to make the process simpler and more user-friendly, while using messaging that transfer agents and fund managers were familiar with already. It didn’t need additional testing or new messaging fields, and it didn’t need any development by the transfer agents or fund managers.

Is there a tendency to over-complicate this kind of service?

People often look for perfection in automation. If all of an organisation’s processes are manual, and the plan is to automate them, it can be difficult to define every single thing that a team does, or wants to do. That can be a barrier, and it can make things take longer, and cost more, than they really have to.

Actually, if you introduce automated processes in bite-sized chunks it can be much easier for organisations to work with them. We offered to automate the back end, and to provide a nice, simple matching engine for the front end, which they can either populate automatically or manually.

It provides matching and quality checking at the point of entry, because other parties have to match to it in order for anything to be accepted—and then the back end is entirely automated. Distributors and brokers can use it immediately without any IT development at all.

What we expect to see is that as firms start to see the benefits, and when they have the time and the budget, they will start thinking about building a line of automation at the front end so they can automatically send messages in to match.

Sometimes, service providers can get carried away and start over-complicating and over-designing things.

The trick is to create a simple, immediately available and high-quality solution, which removes a pain-point from the industry and is easy to use.

Were the main drivers of the service to do with efficiency and cost cutting?

Both efficiency and regulatory challenges were considered, but there is another side to it as well.

The service should provide a level of operational efficiency, which will be beneficial to the practitioner. It will certainly reduce risks and create a better audit trail, which is always useful from a compliance point of view. But we also have to remember the end customer in all of this.

When someone is making a decision to switch between firms, or to make any kind of transaction, we want to be able to deliver a fast, quality service that moves assets in a portfolio without any hassle. If the process is elongated, that gives the customer time to worry about where their assets are and why they haven’t moved yet. We live in an age of instant gratification, and if everything isn’t done at the push of a button, customers start to worry.

There is no need to show the client all the workings of the engine sitting in the back office and underpinning everything that moves. All we have to do is to make that transfer quickly and effectively, so that the customers enjoy the level of comfort they expect. That will lead to a higher level of confidence in the industry, and a higher level of trust.

Obviously, the financial services industry has had a rocky road since 2008, and the more we can do to ensure a high-quality service, the more that consumer trust will build and evolve.

What kinds of operational challenges remain?

Our industry is challenged on a number of fronts—ensuring consumer confidence and delivering operational value are both important, and there are also the ongoing requirements to be compliant and to stay ahead of the game.

We have to think about how we can create solutions by re-using as much existing technology and knowhow as we can, in order to deliver benefits as quickly as possible. Our clients are engaging with this and are helping to drive it forward. With so many items on their agendas, if we can deliver something that creates value instantaneously, that’s going to be popular. Projects are competing for IT resources, for time and for budgets, and the payback periods are getting shorter and shorter.

If there’s a problem that needs solving, we see it as our responsibility to solve it in the fastest and most sensible way. If we see friction, we just look for the simplest way to remove it

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