The flood of 16,000 faxes per day that
continue to flow between wraps, custodians and funds mangers will only abate
when industry leaders decide what tasks in managed fund transactions have
become commoditised, and agree to centralise them. This is similar to what
Australia’s banks
decided years ago on cheque clearing, according to Ausmaq chief executive Rob
Brown, who chaired a session at the conference appropriately titled ‘Taking a
Leaf out of the Banks’ Books – Towards an Homogenous System for Funds
Management Transactions’.
Some of the conversation revolved around SWIFT’s
SWIFT Net Funds project, which currently has four major local institutions live
with another five committed to go live by the end of this year, according to
SWIFT’s commercial manager of funds, Tim Hamer. SWIFTNet Funds has introduced standardised
messages covering the gamut of managed fund transactions – orders,
confirmations, holding statements, account openings, transaction statements,
NAV reporting, cash flow reporting, communication reporting and transfers.
Including
such major players as Vanguard, BT Wrap, National Custodian Services and Ausmaq
(a cost-effective source of connectivity for smaller funds managers), Brown
said the SWIFTNet project was a good chance to eliminate faxes at the wholesale
end of the industry because, in SWIFT, it used a messaging framework which most
players, particularly banks, already utilised in other parts of their organisation.
Simon Ractliffe of Global Funds Network said IFSA should encourage the
executives of all the largest retail managers and platforms to collectively decide
which “utility functions” they were happy to share, leaving them free to “win
business based on their brand and level of customer service”. He said IFSA’s
co-ordinating role was important, otherwise a compelling utility from an
individual vendor might emerge, attracting a few players but overall
fragmenting efforts to further straight-through processing (STP). Platforms
would also play a big part in any holistic, adviser-to-custodian solution, Tim
Worner of Morse Consulting said in the panel discussion. “Platforms won’t go
away, most of this talk that you can connect distribution directly with
manufacturing is rubbish,” he said.
Platforms performed “hard administrative work”
beyond the scope of desktop software, Worner said, and whereas SWIFT Net worked
from the custodian end back toward the frontoffice, Worner predicted the most effective
fax-killer would be built to fit with adviser business processes. He said
consolidation to create “mega-platforms” would benefit STP efforts, as would
industry agreement on commoditised processes which could be shared.
The ability
to deal with both managed funds and directly-held assets would also be crucial,
Worner said. SWIFT’s Hamer said an industry utility to standardise basic
managed fund transactions “should have happened years ago”, and with the
Government’s renewed focus on fees paid by retail investors, the industry
risked having a regulated utility imposed on it if it did not come up with one
itself. Morse’s Worner went so far as to daydream that if the industry did set about
creating its own utility, it might be seen by the Rudd Government as a “shovel-ready
project” worthy of funding from the stimulus package. “But I wouldn’t hold my
breath for that,” he said.
