Bravura
Automation can cancel out the fallibility of people, says Neil Richards of Bravura
Trend one: the ever-growing data demands from regulators
This is an interesting one. I’m responsible for GTAS and GFAS, which are two of our transfer agency platforms, and from a client perspective, there is a drive for data from regulators. Distributors’ demands are increasing, and fund managers are asking for more information regarding management information. What we are focusing on is not only meeting the day-to-day needs of the transfer agent, but also having all the data requirements going forward.
We’re looking at things such as our taWeb solution, which allows information to be delivered to the client in a self-service function. If you want information, you can go and get it, rather than ask for it.
To help compliment that, we have an ODS (operational data store) solution into that can receive data feeds from multiple transfer agency platforms (whether Bravura’s or anyone else’s) and provides a consolidated view of the data. We think this is where the market is going to go. Distribution is getting more global, especially with the advent of UCITS IV funds, which are extremely popular in Asia, and a lot of companies have one or more transfer agency systems to satisfy one or more geographic locations.
Obviously, it would be beneficial for companies to use one consolidated transfer agency platform across all locations, but there are often many practical, financial, or time-to-market barriers to this, and in the interim, if data reporting can be consolidated across platforms, then this is the next best thing. It permits standardisation of the process, which in turn helps out with cost and this is a significant driver. This is why we’re focusing on STP, data warehousing and our web-based front ends, as well as looking after the core transfer agency platforms as well.
Trend two: the road to standardisation
I don’t believe that there is any challenge to standardisation under the assumption that firms are too proprietary with their platforms. I think it’s a question of how you deliver it. If you’re saying to a service—regardless of what the service is—‘we want you to change the way you distribute data so we can consolidate it’, then yes, there would be resistance. This is the old ‘what’s in it for us’ adage. You are taking our data and doing something with it—so why are we doing all the work? I would compare it to the US Foreign Account Tax Compliance Act (FATCA); everyone is up in arms about it, because the only real benefit is to the IRS. Smart if you’re a regulator, but not very good from a PR perspective.
But if you have a standardised template that says, ‘here are all the fields that we offer’, and then you just have to map A to B, it may work because there is action coming from both sides. Overall, I wouldn’t imagine there would be huge resistance to it, because it’s ultimately the client who is driving that process. For example, if a fund company with two or three transfer agency systems wanted to use our ODS system, they can simply tell their providers that they want to centralise in a certain place and to please provide the data stream.
Trend three: regulation
At the moment, the regulation of note is FATCA. The new account procedures need to be in place by January 2014. Admittedly, it’s quite a way off, but it’s something that needs to be addressed and implemented this year. A lot of the regulatory activity has been primarily focused on transfer agency, but I now see it as moving onto the custodians. We have yet to see any changes as to how we supply data, but if we do have to, I suspect that it’s going to be around the custodian side on asset reporting, trading and exposures.
Trend four: operational risk in fund administration
This is the most challenging piece of transfer agency outside of the regulatory space. With all the uncertainty that has been going on, people have become very risk-averse. From a transfer agency perspective, you need to make sure that everything is in place, because you’re effectively looking after three sets of clients.
You have the client of the fund manager that you’re administering the funds on behalf of and you have the distributor, which really holds the key these days. From the way that transfer agency is evolving over the years, I see the distributor becoming king; if they like you and they like your administration, then you’re more likely to sell your funds to them.
Then of course, you also have the end user. What you’re trying to do is ensure that as little as possible goes wrong, because alongside that reputational risk issue, there’s operational and financial risk. If you get something wrong as a transfer agent, it could cost you money. We’re certainly seeing a drive towards STP, and that seems to be the big push. If we’re using distributors, we’re encouraging them in turn to use SWIFT and encouraging electronic communication, and therefore lessening the chance of something going wrong.
I think one of the key drivers for transfer agency going forward is about how you become volume insensitive. It shouldn’t matter whether you trade one, two or 100,000 deals; the processes you have in place should allow you to cater to each trade in the best possible way. Automation is a key part of that, but if you can become volume insensitive, it allows you to free up and allow existing staff to become the gatekeepers for the things you have to look at and the processes that you want to put a more manual focus on.
Again, there is a still a balance there because there is no point receiving all the efficiencies of scale from that side of things if you only swamp an operation from the other side. A great number of manual steps will only add additional risk.
As soon as something is touched by a human, there is going to be an element of risk, as we all make mistakes. There tends to be a gut reaction of ‘throw people at it’ and this is not necessarily the best approach. AST
