Custodians and superannuation funds should establish clear protocols for the transfer of market data, says Jason Cotter, commercial manager of investments at AustralianSuper. Doing so will not only lead to reduced costs across the industry, but also prevent external companies from poaching business.
Speaking at last week’s Investment Administration Conference in Sydney, Cotter said either industry will get together to solve the issue of protocols or “someone will come along who will”.
“I’ve had two approaches in the past few months out of the blue from US firms I’ve never heard of. The approaches were a little bit unpolished and one was threatening us that [by not] giving the information, we were breaching some obscure US law. So that didn’t go much further,” he told delegates.
“But they’re saying give us all the information… we’re going to start providing these areas of reporting. We’ll report to your regulators for you. They didn’t quite understand that we’re not actually in the US.”
Cotter says it highlights how technology enables other firms to provide services to funds that custodians have traditionally provided.
“I expect that custodians will evolve their business model as technology opens their traditional markets up to competitors,” he tells IM Online. “As in all things, funds need to undertake appropriate due diligence to ensure the best decisions are made in light of the overall goal of maximising member’s returns. This doesn’t mean that we should not be open to innovations and alternative approaches.”
Cotter says that while it would be great to have a custodian that’s a one-stop shop, industry still has to solve the problem, whether internally or looking elsewhere.
“A key issue is presenting the data in an easier manner to integrate into funds’ reporting regimes. I am yet to see an effective general ledger feed from a custodian so instead we re-key data into general ledger systems to produce financial accounts. Clearly this is not ideal,” he says.
“There is also room for improved reporting for tax and the ability to handle present entitlement reporting.”