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Tying Customer Experience To Concrete Data


"It's all about the customer experience."

That sounds like a slogan taken out of a hotel or airline brochure. After all, if hospitality companies can't be hospitable, they won't stay in business long.

But the same is now starting to apply to fund administrators and other service providers who are trying to increase revenues in a competitive market. In an age where transparency has become the new buzzword for investors and regulators, the customer experience has becoming synonymous with providing data and lots of it to fund managers and their customers.

The answers: customized reporting tools, customer alerts and more risk metrics. And they are all accessible through the click of a button.

"Fund administrators and other service providers are now engaging with their customers to ensure they are aware of any potential operational risks," said Christopher Remondi, managing director of systems in the Jersey City, N.J., office of global custodian Brown Brothers Harriman. "In our terms it's the client information experience that counts."

One of the largest and likely most easily preventable risks: failing to settle a transaction on time which can cost the fund manager hundreds or thousands of dollars per trade depending on the reason for the problem, the asset class involved and the market involved. That's just for payments to counterparties and potential buy-ins of securities. It doesn't even take into account the time operations executives must spend investigating what went wrong and correcting the problem.

Yet another: failing to know about a corporate action-particularly one which involves making a decision. Fund managers who find out about a corporate reorganization such as a merger, tender offer or exchange offer too late may easily end up making the wrong investment or calculating an incorrect net asset value. And the fund manager isn't the only one affected. The custodian bank may have to cover any losses, to appease the injured investment manager in case it was at fault. Most banks allocate a reserve fund within their asset servicing units to cover such events.

Instead of taking a standardized push approach-delivering the data to the client at designated intervals-BBH is also allowing the client to look for specific information on its own.

As of August 2010, fund managers could ask for information on corporate actions involving all of the securities held by BBH and as of January, clients can view their transaction details at the click of a button through an application that aims to deliver real-time transaction analytics.

They can do so based on the asset class, the country involved and broker-dealer who executed the order. The broker-dealers are ranked based on the number of trades failing to settle on time.

Making the transaction information even more useful: it can be gathered not only for the assets which BBH safekeeps but those held at other custodian banks as well. All of the data from other custodian banks is fed through a data aggregator operated by the bank's Infomediary unit and then uploaded into a data repository so the information can be available through BBH's web portal.

Next in line for 2012: Cash statements on demand, with balances from BBH and potentially other banks, historical transactions with time-stamping of each step in the life of the transaction and intraday tax lot information, Remondi said.

The new BBH process allows fund managers to not only access information on their accounts immediately, but also be alerted to potential problems such as an unmatched trade or a deadline for a takeover, exchange or tender offer for which they must make a decision.

Remondi declined to specify just how much BBH is spending on the upgrades to how it delivers information. However, he said it will account for more than 50 percent of money allocated for new technology. Investments in new technology will comprise 70% of BBH's IT budget for 2012; the other 30% will be allocated to IT maintenance.

That investment could also have a bottom line benefit to the bank as well, far beyond immediate customer satisfaction. Client service executives can reduce the number of phone calls with fund managers, to provide the same data which already appears either in alerts or online. The extra time can be used to discuss more lucrative services such as collateral management and processing work for over-the-counter derivatives.

For eClerx, a Mumbai-headquartered firm specializing in outsourced asset-servicing functions, helping fund managers better evaluate just which broker-dealers they should do business with through a dashboard also provides a competitive advantage.

"Fund managers often judge broker-dealers based on their implicit and explicit execution costs," said Alberto Corvo, managing principal of financial services. "However, knowing which broker-dealers failed to affirm trades or affirmed the trade several hours after a designated deadline should also be taken into consideration in making a decision."

The reason: while ensuring best-execution is important, the fund manager will still be burdened by spending lots of time-and money cleaning up trades which failed to settle on time because their terms weren't matched correctly or on time by the broker-dealer.

Yet another area of interest for fund managers: ensuring accurate product data on a timely basis to meet regulatory and investor demands. Used by some of the largest asset managers globally, including J.P. Morgan Asset Management and Schroders Investment Management, MoneyMate's DataManager centralizes and validates investment product data. That data can then be used by fund managers for websites, fact sheets, client reports and sales and marketing materials.MME