Technology and Global Transfer Agency

Richard Clarkson
Head of Solutions, Transfer Agency
We hear much of the latest and greatest technologies within the Financial Services industry and even Transfer Agency is not immune to these fashion, fads & changes (see Is Blockchain a disruptor or enabler for Transfer Agency?).  Each coming new technology offers the opportunity for Transfer Agency and Fund Distributors to address servicing dilemmas for Investors and Asset Managers.

Despite recent bouts of doom and gloom around the existence of Transfer Agency, we see that firms are thriving and continuing to innovate their services.  We can safely put to bed the introspection and existential concerns that had bubbled in various threads on Transfer Agency within Europe and beyond.

Indeed, looking at the Transfer Agency market, there are opportunities for those providing TA services to grow their offerings and, further, become an important value-add component of the Asset Manager.  This opportunity still exists even in the unprecedented climate as a result of the existing restrictions across the globe.

Within the industry, we know that Asset Managers will partner with those Transfer Agents 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 service (including digital), which is consistent across all markets and Investor segments.

Transfer Agents, in return, will gladly partner the ‘smart’ Asset Manager and will reap the benefits from a having a strong underlying technology partner who recognises that the Transfer Agent brings unique skills in servicing the Investor journey.  The skills and knowledge of Transfer Agents, when wedded with best-of-breed technology, can lift the Transfer Agent & Asset Manager together to new levels of service and market reach.

There is no doubt that Transfer Agency is ripe for disruption given the plethora of legacy systems and cumbersome processes that are involved.  Many firms (as Providers and FinTechs) have focused on reducing the friction involved in some of the processes by looking at utilising technology in these complex processes.

Here we see the likes of Market Infrastructure providers smoothen the processing of Deal Instructions; FinTechs address specific processes with limited added-value (for example Reconciliations).  The more complex areas, such as KYC, have long been a holy grail and multiple start-ups are using technologies such as Blockchain to make the process as painless as possible.

These additions to the Transfer Agent will help improve elements of the journey, however, they also add challenges.  Transfer Agent’s technical environment will expand with these additional applications and integrations.  Applying this to an already creaking, legacy environment is suboptimal but is done for the sake of expediency.

With the multitude of tactical solutions, Transfer Agents do their best to keep the lights on but there are constant Cost & Servicing pressures, not to mention ongoing local & regional Regulatory requirements.  But doing the best is now further challenged in the current climate and will need addressing in the new normal world.

Consolidation of platforms into a single system enabled will no longer be a nice to have, but a must have for Transfer Agents to both survive and bring value.  In addition, Transfer Agents 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 the increasing focus by Regulators to meet the needs of the next generation of investors who are digitally native and Global Citizens and protect PII, Transfer Agents will need to have a simpler environment to address this with Technology rather than current High Risk Operational processes that exist today.

Not only are the future Investor wanting 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 for their Investor irrespective of the Investor’s or Fund’s Domicile.  Asset Mangers are now truly looking for the Global experience.

Do Transfer Agents 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, its key is the delivery of services & experiences. 

Over time, Transfer Agents have required certain platforms for certain markets and/or regions resulting in an overly complex environment where multiple systems overlap as they service specific countries/markets and products.  It is not uncommon to hear of even mid-range Transfer Agents having 5, 6 or even 7 systems for their Long Only Fund clients, and these systems only cover parts of the European markets. 

To look at a Global offering requires bold decision making as it will require an honest of review of legacy systems and processes.

As a leading provider of Transfer Agency Core platform software, Oracle has seen how Global Asset Managers are now looking for this truly Global offering.  As a result, Oracle is continuing to evolve its TA platform, FLEXCUBE Investor Servicing, to help those Asset Managers and Transfer Agents offer this Global service to Investors.  This evolution is also a step change, as it takes Transfer Agency into a place where it can be the foundation for the Investor irrespective of either the Investor’s or Asset Manager’s 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 yet this author feels the investments 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, Transfer Agents that have accepted the challenge from Asset Managers to provide a seamless, consistent service for the Investor irrespective of location.  To do this, these Transfer Agents have recognised that they cannot effectively support this by having multiple systems within their ecosystem.  These TA’s have moved the dial by collapsing their Long Only Fund systems globally onto one system, with the exception of the US market.

To do this, the core TA system needs to have the necessary broad & deep functions to service multiple jurisdictions, be scalable to handle Retail and Institutional clients and provide the vital consistent data entry & 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 & Global Investor? Working with Transfer Agents & Fund Distributors Oracle can help identify the Value opportunities within the Organisation to streamline as well looking outward to their partners.  Oracle can help run quick and effective assessments to test various Value Hypotheses. 

This Blog has been published on Funds Europe in the FundTech Spring eZine here: https://www.funds-europe.com/fundtech-spring-2020/sponsored-feature-going-global

To learn more, feel free to message me to explore more, or have a conversation.

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