ORGANISING back office business

A lack of standardisation in fund processing and distribution across Asia is a major challenge for players looking to achieve operational efficiencies and scale. Gradually standards are penetrating the region, but getting the Asian fund management industry to move together towards common formats is like “herding cats,” according to Eric Chua, regional head of investment fund solutions at Swift. The systems are there, according to Mr Chua, but “one of the most important pieces that is missing is organising the markets. The fund industry has so many players: You’ve got the fund managers that manufacture funds, you’ve got transfer agents and fund administrators... and you’ve got the distributors,” he says. “Then in the distributors you’ve got fragmentation. So how do you organise it? If you don’t have volume and scale, you’re never going to put together an IT project.” “There are ten fund managers that are competing for business in Asia, but they all acknowledged a common problem with the back office,” says Mr Chua. “So it’s quite a step for these fund managers to say we want to offer automation to our distributors, because it is a business that is going to grow. They’ve actually rolled out programmes in terms of engaging their distributors.” The common issue that the members of Asian Fund Automation Consortium have identified is the scalability of their operations. The manual nature of existing back office work in a region where the predominant messaging standard is the fax machine means that to scale up is to add more staff, an expensive prospect in a tight labour markets. The preoccupation with operational efficiency and scalability is becoming apparent across the fund side and the distributor side, as private banks in particular struggle to cope with the growth of the market, according to Justin Ong, leader of the wealth management practice at PricewaterhouseCoopers Singapore. “A lot of them are now looking at building infrastructure, mainly because in the initial years of expansion, everybody was spending a lot of money on buying teams, and what we’ve found is that because the Asian business has been growing 200-300 per cent annually, most of them have now realised that they have not invested enough in infrastructure to support the growth in business,” he says. Mr Ong believes that, while many companies are now looking to improve their back end operations, it could be a year before those enhancements take effect. These scalability issues are being exacerbated by a further squeeze in the market for qualified staff across the wealth management business and related industries. The competition for talent has come to a head as global investment banks create their Asian nexuses in the main private banking centres. Churn amongst operations staff is becoming a significant issue. As in other regions, human resources becomes a major limiting factor on business growth. Automation means that manual tasks can be replaced, freeing up resources. A recent PwC survey showed that relationship managers spend 20 per cent of their time dealing with administrative issues. “If you have your processes right then you can reduce that downtime by half, and allow you to spend more time on client service. And banks are starting to realise that,” Mr Ong says. “Because the industry has boomed in the last five years, a lot of them have been focused on delivering results – get money into the products – very few of them had a long term strategy, until the last few years, when they realised that they had to think a bit more long term.”