Basis point pricing for unit registry services is increasingly coming under pressure, according to Tim Worner, head of the Melbourne office of fund management consultancy specialists CSTIM.

“In the software world in particular there is a growing resistance to basis point fees,” Worner said. Worner, who presented at the Investment and Technology conference held last week in Sydney, said convergence was the key trend in the investor record-keeping business as both software and third-party service providers look for the scale benefits of consolidation. CSTIM noted 15 different investor record-keeping systems in a recent survey of 20 fund managers. Worner said with the financial services industry already lobbying hard to reduce obstacles to product rationalisation the number of such record-keeping systems is likely to diminish. He said the likely winners of the expected consolidation process would be superannuation fund administrators and platforms, which had the scale and experience in dealing with large numbers of clients. However, Worner said fund managers would increasingly outsource record-keeping duties to focus their IT spend on “core competencies”. Other possible players in the investor record-keeping business such as custodians, distributors and IMA providers would either retain or decrease their current market shares as the consolidation trend continued, he told I&T conference delegates. Worner didn’t rule out the possibility of a new player entering the market but said there were significant barriers to entry. “It is unlikely a new entrant will capture scale across multiple clients in the short term,” he said. However, he said companies such as Computershare and IBM (which recently took over Russell’s superannuation member admin business) did have the capacity to handle large transaction numbers.

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