Oracle’s Richard Clarkson outlines the need for transfer agencies to embrace a global system and the path to get them there.
We hear much of the latest and greatest technologies within the financial services industry and even the transfer agency (TA) is not immune to these changing fashions and fads. Each coming new technology offers the opportunity for TAs and fund distributors to address servicing dilemmas for investors and asset managers. Despite recent bouts of doom and gloom around the existence of TAs, many are thriving and continuing to innovate.
We can safely put to bed the existential concerns on TAs within Europe and beyond. Indeed, there are opportunities for those providing TA services to grow their offerings and become an important value-add partner to asset managers.
This opportunity still exists even amid the unprecedented global restrictions of the current pandemic. Within the industry, we know that asset managers will partner with those TAs that help them support the investor on their investment journey. The ‘smart’ asset manager will therefore want to find the TA that offers an excellent, dependable and digital service which is consistent across all markets and investor segments.
Transfer agents in return will gladly reap the benefits of having a strong underlying technology partner who recognises that the TA brings unique skills in servicing the investor journey. The skills and knowledge of TAs, when wedded with best-of-breed technology, can lift both TA and asset manager to new levels of service and market reach.
Ripe for disruption
There is no doubt that the TA sector is ripe for disruption, given the plethora of legacy systems and cumbersome processes that are involved, and many firms, old and new, have looked to reduce the friction.
Market infrastructure providers have looked to smoothen the processing of deal instructions while fintechs have focused on the processes that have little added value, such as reconciliations. More complex areas like KYC have long been a Holy Grail and multiple start-ups are using technology like the blockchain to make the process as painless as possible. These developments will help improve parts of the TA’s role but they also add challenges.
Transfer agents’ technical environment will expand with these additional applications and integrations. Applying this to an already creaking legacy environment is suboptimal, but it is often done for the sake of expediency. With the multitude of tactical solutions, TAs do their best to keep the lights on but there are constant cost and servicing pressures, not to mention ongoing local and regional regulatory requirements.
These efforts are now further challenged in the current Covid-19 climate and will need addressing once we get to a new normal. Consolidation of platforms into a single system will no longer be a nice to have, but a must have for TAs to both survive and bring value.
In addition, TAs will need to effectively leverage the cloud to maximise their savings opportunities as revenue and margins will be impacted for the foreseeable future. Further, with regulators increasingly focused on the next generation of digitally native investors and ensuring the protection of personal information, TAs will need to have a simpler operating environment than the one they currently have.
Not only does the future investor want a nimbler, mobile-driven service, they are also much more likely to be mobile in their career. Adaptive asset managers have recognised this, as they now seek to have a seamless service irrespective of the domicile of the investor or the fund.
Asset managers are now truly looking for the global experience. Do TAs need to struggle by managing multiple platforms to cater for the asset managers they service? Asset managers’ demands are varied as they look to an ever-more complex investor base, but at the core is the delivery of services and experiences.
Over time, TAs have required certain platforms for certain markets and regions, resulting in an overly complex environment where multiple systems overlap. It is not uncommon to hear of even mid-range TAs having five, six or seven systems for their long-only clients, which only cover parts of the European market. To look at a global offering requires bold decision-making, as it will require an honest review of legacy systems and processes.
As a leading provider of TA core platform software, Oracle has seen how international asset managers are looking for a truly global offering. As a result, Oracle is continuing to evolve its TA platform, FLEXCUBE Investor Servicing, to help asset managers and TAs offer this global service to investors. This evolution is also a step change, as it takes the TA to a place where it can be the foundation for the investor irrespective of location.
It is possible for companies to invest heavily in reporting layers to mask their underlying systems and provide a pseudo-standard package. This has benefits of projecting a standard service to the outside world. But the return on this investment may not be fully realised as the fundamental issue of platform complexity is not addressed.
Digital layers and interfaces are vital to support asset managers but with a myriad of systems underneath, there is no certainty that this solution is scalable and can easily support the requirements of a truly global offering. It reminds us of the swan that appears serene on the surface but is expending massive energy underneath to move along at a slow but steady pace.
There are, however, TAs that have accepted the challenge from asset managers to provide a seamless, consistent service for the investor regardless of location. To do this, these TAs have recognised that they cannot effectively support this by having multiple systems within their ecosystem. These TAs have moved the dial by collapsing their multiple long-only systems into one global platform, with the exception of the US.
To do this, the core TA system needs to have the necessary broad and deep functions to service multiple jurisdictions, be scalable enough to handle retail and institutional clients and provide the vital consistent data entry and model for service excellence.
With Oracle FLEXCUBE Investor Servicing, it is possible to attain this new target global operating model. The question now for transfer agents is how do I support the global asset manager efficiently and effectively? Is it better to build a layer to mask the myriad of systems or is it better to have a scalable solution based on a core engine that can truly service the local, regional and global investor?
Working with TAs and fund distributors, Oracle can help identify the value opportunities within the organisation to streamline as well as looking outward to their partners. Oracle can help run quick and effective assessments to test various value hypotheses.
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