The Hayne royal commission has turned a spotlight on investment operations by underlining its role in promoting transparency to identify operation risk and foster best-in-class investment management.
At the Investment Magazine Investment Operations Conference, delegates heard that the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry promoted a greater focus on governance and transparency and heightened the importance of investment operations.
Indeed, a poll taken at the conference revealed a solid 32 per cent of delegates said that while their function had not changed, their role had been elevated within the organisation since the public hearings.
A handful of delegates polled – 8 per cent – found their function had changed and their role was viewed as more important.
Deloitte adviser Craig Roodt pointed to the themes that emerged from the hearings saying many were to do with information asymmetry and the misalignment between “what needed to be done and what was actually done” by financial service providers.
Roodt said it was critical that investment operations provide the transparency to address that information asymmetry and be a source of truth that makes clear what leads to certain outcomes.
“It’s not necessarily the case that people were setting out to do the wrong thing,” he noted. “They often had the right intentions but weren’t able to execute operations-wise, for whatever reason. In many ways, although investment operations can provide the capacity to execute whatever you need to do in the investment space, it has got to be aligned with the investment strategy.”
In addition to focusing on ensuring that good risk management matrices are in place, Roodt said operations should have a say.
He told delegates that investment ops needed to wipe out the leakage that affects efficiency, strategy and returns.
Paying money needs to be in the members’ interest, he told the audience. “That’s why you invest in ops, to enhance value and wipe out that leakage.”
One specific royal commission recommendation that delegates discussed during the session was expanding the Banking Executive Accountability Regime to include super funds, insurers and retail investment managers.
