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Global Transfer Agency: Myth or Reality

Tushar Chitra
Vice President, Product Strategy & Marketing, Oracle Financial Services

By Tushar Chitra, Vice President – Product Strategy & Marketing, Oracle Financial Services and, Swapnil Joshi Senior Manager, Strategy, Oracle Financial Services

The asset management industry has been on an upswing over the last decade, and assets under management have doubled when compared to 2008. However, even though asset growth has been significant, operating profit as a percentage of net revenues has remained stagnant. Furthermore, there has been a continuous flux of regulations since 2008 but asset managers have successfully been able to keep the costs down. The downward cost pressure has mostly been borne by the transfer agents who have focused singularly on operational efficiency to bring value to Asset managers.

But as financial technology matures and takes centre stage in the banking/payment industry, the focus of transfer agencies has also shifted. The shift occurs from enhancing operational efficiency to improving growth. The expectation today is for transfer agencies is to help asset managers drive long-term and sustainable growth outside of the back office.

The requirements of asset managers are growing exponentially. Many are increasingly looking for a connected, global transfer agency model. They require a model that allows them to seamlessly manage funds from multiple domiciles in both developed and emerging markets at the same time. While the promise of a global transfer agency system is every asset manager’s dream, when seen with a pragmatic lens, it’s a myth. The benefits of such an offering are path-breaking, but ground-level complexities can put off even serious proponents.

Let us see how this has played out in the past. As asset managers expanded their operations to newer markets, they were forced to use local/regional transfer agents to service them. This is often taking into consideration local nuances. At any given time, a global asset manager could be interacting with 6-10 transfer agents across the globe. The data residing in multiple systems, scattered globally, meant that the asset manager does not get a clear view of fund positions/holdings/buying or selling trends. Similarly, the distributors/investors have an equally fragmented view resulting in poor/unanswered queries and incomplete information resulting in poor customer experience even in the digitized world.

A global transfer agency model promises to change all this. With global data across all fund ranges, present in a single transactional system, managers get a real-time view of fund holdings, buy/sell trends. The same data can be used as a source to present customized views for intermediaries/investors through desired channels. Investors can have a single investment ID across the globe, allowing them the flexibility of undergoing the KYC process for a single account and transaction in fund ranges across the world. This provides a global view of holdings and real-time static data as well as positional updates. Fund manager/investor, as well as distributor, can take customer servicing experience to an entirely new level and raise the bar for the competition.

Three Things Required

Processing Centres : The global transfer agency model would require the setting up of global/regional processing hubs to allow for a “follow the sun” processing for global asset managers. While the worldwide centre takes care of main/centralized business functions, the local centres drive account opening/transaction handling/local reporting needs. The global centre acts a nerve centre managing these local/regional centres and ensuring 24/7 processing availability/support.

Process Standardization : Standardized account opening/KYC/dealing/settlement processes around the globe with flexibility for local nuances will be required. More often than not, we see local procedures being used predominantly. However, considering the sheer size and scale of the business, this is a trigger point for failure. Standardized processes and optimized process flows would help ease employee training. It also guarantees the same experience to a global investor/distributor who transacts with asset managers in different geographies.

Global System : Lastly, the most essential cog in the wheel would be the underlying system. We all know and understand the vagaries of the asset management space. While some markets are increasingly adopting STP, many are still relying on faxes. Even those who have adopted STP follow different standards. NSCC in the US, EMX in the UK, Fundsettle/Vestima in the EU, Finswitch in South Africa, SWIFT in the Asia-Pacific, TDCC in Taiwan, and basic excel handoffs in other geographies. While some markets are non-intermediated, others are heavily intermediated- the UK has platforms, in the EU the distribution is handled mainly by banks, while retail markets in Asia are driven by agents/IFA/brokers who bring mutual funds within reach of millions of investors. Certain markets work on an omnibus model, while others have direct investors. Some are retail oriented and others institutional. Some markets allow offshore funds, while others only local offerings. Additional flavors of global/local regulations, data privacy requirements, and data access controls/reporting will cause the proposition of having this in a single system fall apart.

Historically, most transfer agency systems have been built as either extension of fund accounting systems, tweaked to handle transfer agency functions, or are an amalgamation of multiple systems acquired over the past. Therefore, they lack the design considerations which are needed to handle the scale or complexity of this proposition.

Transfer agencies require a proven system which works across continents. This system needs to support both retail/institutional transfer agency business. It has the flexibility to adapt to local business rules/regulations while allowing standardization/STP in routine operations. An underlying modern technology stack meeting data, interfacing, analytical needs while being scalable to handle global volumes, and 24/7 processing will be the other key consideration.

The coming together of all these 3 elements will enable a transfer agency to propose a truly global transfer agency offering. If transfer agents are indeed able to achieve it, this will be a robust strategy. It will allow transfer agency providers to thrive and grow their business in multiple directions. The global transfer agency will stop being a myth and will be a reality.

My colleague Swapnil Joshi and I co-authored this blog. We would love to hear your views. You can reach out to us via our emails at swapnil.joshi@oracle.com or tushar.chitra@oracle.com .

For more information, please visit:
Oracle FLEXCUBE Investor Servicing: Visit product page
Oracle Financial Services: https://www.oracle.com/industries/financial-services

Contact us:
Email: financialservices_ww@oracle.com
Email: Tushar Chitra : tushar.chitra@oracle.com
Email: Swapnil Joshi: swapnil.joshi@oracle.com

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