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CRM Technology Goes 21st Century

After two decades of exponential asset growth, fund complexes have developed new outlets for selling their funds - including all points in the electronic universe, from the telephone and mail to PCs and web-enabled personal digital assistants.

Yet, distribution through a wide variety of channels can make it difficult to standardize back-office processing to share information uniformly, particularly at the critical customer relationship management (CRM) point where an investor and a service or sales representative meet.

In today's chaotic environment, it is tricky, to say the least for service reps and sales intermediaries to gain a complete view of client accounts, without toggling through multiple applications. Information silos, workflow bottlenecks and a disjointed customer experience are the unfortunate result.

Until recently, mutual fund servicing functionality has lagged behind the needs of the marketplace. Technology evolved in such a slow and sporadic way that many fund firms are now held hostage by outdated, proprietary client-server architecture ill equipped to support future growth.

Next Gen: Open Platform

Recent new advancements in desktop technology now leverage the power of the Internet to provide fund companies with enhanced capabilities to efficiently manage customer relationships, improve service and workflow efficiencies, execute all financial transactions and share and provide consistent information across all delivery channels.

Adoption of this next generation of desktop technology, however, will require the mutual fund processing industry to think about technology in a different way than it has in the past. No longer a proprietary point of differentiation, technology has become an enabler to compete in a financial services area that is moving, inevitably, toward open standards.

The financial services sector has traditionally been in the vanguard of industries adopting new technology. In the mid 1990s, desktop technology advanced to support the need for automation, standardization and mass customization. To create seamless administration, fund complexes utilized PC/local area network-based systems where business logic was built on client desktops. Known as "thick client" technology, this methodology uses proprietary client-server platforms to perform everyday tasks such as transaction processing and customer inquiries, often based on rules "hard coded" in the desktop applications.

This proprietary model, though providing functions considered highly advanced years ago, has now become outdated. This difficult-to-maintain and customize configuration presents drawbacks to those fund companies that have expanded their distribution strategies. Many funds complexes are now shifting from total reliance on direct sales to distribution through third-parties, including fund supermarkets, fee-based brokers, mutual fund wrap programs and employer-sponsored pension funds.

In this richer, more competitive mutual fund environment, distribution is crucial for success in gathering assets. The share of new long-term fund sales made directly to retail investors has decreased from 23% in 1990 to 15% today, while new sales of funds through third parties or institutional investors has risen from 77% to 85%.

This development means that fund firms are often servicing investors who own another firm's fund, perhaps in a wrap account. Sourcing account information across multiple distribution channels in a closed, proprietary architecture is time-consuming, cumbersome and costly to maintain. As a result, the limitations of proprietary thick-client technology is no longer the answer - far too many complexes, sales support firms and information technology providers rely on one another in the mutual fund world to allow proprietary architecture to continue as the norm. And investors now demanding consolidated, customized account statements won't stand for sub-standard service.

You Say You Want a Revolution

Flexible scalable, open, extensible markup language (XML) technology and new, open Java-based development technology are gaining steam. Because XML is vendor neutral and unconstrained by language, platform or device, it has the potential to revolutionize information.

Application server, "thin client" technology delivers transaction processing and servicing functionality through a browser-based platform. It uses an intelligent, user-customizable application server-based rules engine that will enable fund companies to customize interaction and provide consolidated account information at any level, based on user-defined criteria such as asset levels, source of sales, or traditional, sub-account or wrap account type. Furthermore, information can be delivered to remote locations from a single industry-accepted browser window, eliminating the need to install underlying proprietary software.

PFPC of Wilmington, Del., is one of many service providers that have taken part in the move toward open architecture, contributing to significant desktop technology advancements in the fund processing industry over the past 18 months. Using its mature J2EE frameworks and open XML technology, PFPC, for example, has participated in this initiative with the enhancement of its Impresssm Desktop Suite - Generation Next. Based on "thin client" technology, the program integrates CRM with the Web, voice technology and even straight-through processing.

Those firms who remained trapped by the limitations of outdated client-server platforms may risk shallow market penetration, inefficient use of resources and, ultimately, declining assets.

Michael DeNofrio is executive vice president and senior managing director for PFPC's transfer agency division. Charles A. Gallant is senior vice president, information technology at PFPC and responsible for the technological development of desktop and Internet products.

Copyright 2003 Thomson Media Inc. All Rights Reserved.