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How Can Asset Servicing Firms Create a Competitive Edge in 2024

The asset servicing sector faces an increasingly unstable and unpredictable environment, owing to rising fee pressures, a vastly evolving technology landscape, expanding regulations and an unstable macroeconomic background. As their clients (fund managers) face rising costs, as well as diverse and evolving investor expectations, asset servicers are forced to adapt, often experiencing significant margin compression. 

Against this already challenging backdrop looms the threat of competition. A 2023 survey of global fund managers revealed that some 25% are looking at switching fund administration providers within the next 12-18 months. For these fund managers, the top underlying drivers for moving provider are improved service levels, higher quality of data and reporting, and better technology. 

However, there are actions that asset servicers can take to mitigate the risk of churn and stand out against the competition: 

It’s Time to Retire Excel

While much of the banking industry is focused on the latest in AI and machine learning, an EY survey found that a mere 15% of asset servicing firms were using a workflow management system to handle investor lifecycle management (ILM) operations Despite the ongoing narrative and consensus amongst industry leadership that technology is the future of asset servicing, adoption remains low compared to the rest of the financial services ecosystem. 

By establishing a digital transformation programme which focuses on end-to-end investor lifecycle management, rather than fixating on solving ten immediate problems with ten different, siloed solutions, asset servicers can improve the overall value chain. Modern ILM technology can streamline operations, improve data quality and accuracy, and take the manual effort out of generating valuable client reporting. Using technology to automate routine tasks not only reduces errors, but frees up valuable human resources for complex, high-value-add activities. The result of this is an operationally efficient, margin-resistant business model which allows for greater flexibility and scalability. 

Happy Investor, Happy Client 

Perhaps even more so than in other areas of financial services, the client and investor experiences which asset servicers can provide is a huge differentiator. Millennials (the modern investor) see a strong digital offering as the most important consideration when selecting an investment management provider and are 59% more likely than previous generations to choose (or switch to) providers which continuously invest in and enhance digital platforms. 

For many investors, slow onboarding times, duplicate data and document requests and lack of transparency regarding the progress of their fund subscription applications are a source of enormous frustration. Key to replicating the ‘Amazon’ experience for investors is engaging them to self-serve using digital channels, such as dedicated digital investor portal. When correctly integrated with internal investor onboarding systems, it allows them to seamlessly upload and access their information on-demand, as well as track their applications in real-time. This reduces the number of touchpoints, expedites applications (from both perspectives) and improves the overall investor experience. 

But what if the self-service approach were extended to include the fund managers themselves? The expansion of a self-service portal to include a fund manager view would provide clients with on-demand access to their investors’ applications, allowing them to review and submit approvals, track fund subscriptions and perhaps eventually be a source of MI/reporting, reducing the operational burden on asset servicers and vastly improve the client experience. 

Get Ahead on Regulatory Compliance 

As fund managers take on increasingly heavy regulatory burdens, asset servicers have an opportunity to offer value-added solutions to meet those demands. By monitoring the regulatory landscape and investing in modern technology which is equipped to scale as regulatory operational requirements grow, asset servicers can demonstrate real thought leadership and offer products and solutions to clients to really elevate their relationship with them. 

We have already seen the high demand for solutions related to Tax classification and reporting, including the Foreign Account Tax Compliance Act (FATCA), under which foreign financial institutions must comply with reporting, due diligence and withholding requirements with respect to their US accounts, as well as the Common Reporting Standard (CRS), its global equivalent for account holders (direct or indirect) which are tax resident in another CRS-participating country. Affecting (among others) mutual funds, UCITS, exchange-traded funds, hedge funds, private equity funds, and other investment vehicles, the effect of these tax regulations requires due diligence and reporting on a large population of investors, with many asset servicers in Europe pivoting to offer solutions to fund managers in this space. 

Other global regulations, including the Alternative Investment Fund Managers Directive (AIFMD) which provides a regulatory investor protection framework applicable to EU-registered hedge funds, private equity funds, and real estate investment, introduce additional regulatory complexity to fund managers and asset servicers. Asset servicers should focus on developing offerings to meet the multi-jurisdictional client demands according to local requirements. 

How Investor Lifecycle Management Technology Solutions Can Help 

Ultimately, embedding digitalization into transformation strategy is key to unlocking competitive advantage. The most progressive asset servicers will recognize the role of technology as a business and operational accelerator, and leverage the current technology wave to catalyse a new generation of high-quality services. 

Fenergo specializes in true, holistic investor lifecycle management. Our Client and Investor Lifecycle Management solutions empower asset servicing firms to eliminate manual processes and transform investor, client and fund onboarding operations into a digital-first model. 

Importantly, investing in innovative technology should not be at the expense of creating an additional operational and financial burden. Fenergo integrates seamlessly into your existing technology landscape to orchestrate the entire investor lifecycle within a single platform. This includes initial digital fund subscription, onboarding and due diligence (KYC/AML) of clients, funds and investors, Tax classification (FATCA/CRS) risk assessment, as well as continuous monitoring of post-subscription transactions. Centralizing client and investor lifecycle management in a single platform not only reduces costs, but also connects all stakeholders – including investors, clients and internal users – to promote transparency, expedite investor fund launches and subscriptions, and reduce unnecessary touchpoints. 

Regulatory compliance should be embedded into existing operating models without requiring additional technology platforms. Fenergo’s Client and Investor Lifecycle Management solutions feature pre-packaged investor, client, and fund journeys (workflows), codified KYC, AML and regulatory policies for over 120 jurisdictions, as well as in-built risk models, intuitively guiding your users through seamless, automated compliance. 

With influence from our large community of global asset servicers spanning traditional and alternative investments, corporates services and more, Fenergo’s Client and Investor Lifecycle Management solutions can help your organization streamline operational efficiencies, futureproof regulatory compliance and deliver an exceptional experience, in as little as 12 weeks. 

Discover how Fenergo Client and Investor Lifecycle Management can help your organization’s digital transformation goals by requesting a demo.