External systems can simplify the end of the financial year ______

Blog / 11 Aug 2016

Sarah Hayward, Managing Director - Head of Australia and New Zealand

In 2009, the government kicked off its superannuation system review to bring the back office of super into the 21st century, which was a pivotal change for the wealth management sector.

The review recognised that the default super system needed fixing and delivered a framework, with mandated electronic submission of contributions, rollovers, regulations and member changes designed to benefit the end investor.

The resulting Stronger Super reforms have shone the spotlight on improving efficiency of back offices as a priority for our industry, arming Australian Prudential Regulatory Authority, ASIC and the Australian Taxation Office with the tools they need to improve their oversight of super.

While the super sector has begun to see a benefit from these reforms, those in the managed funds space have only realised similar efficiencies if they had the foresight to engage technology to automate the information flow between platforms, advisers and investors.

As fund managers tackle another end of financial year, how many meeting rooms resemble paper palaces and how many more late-night pizza deliveries have to be made before a back office efficiency review makes it to the top of the priority list? The end of the financial year is a moment of truth for funds and advisers in delivering on objectives to investors.

This is the time when fund managers must supply tax statements to platforms for the preparation of individual tax statements, meaning units must reconcile between fund managers and platforms, and reflect balances held by their respective counterparties. Any glitch in the system manifests in statement inaccuracy.

There are four key statement types that travel through the industry – for reconciliation purposes there are statements of holdings and statements of transactions; and for distribution purposes, statements of tax and statements of income. Preceding reporting is the core function of order routing.

Five years ago Calastone enabled funds, administrators and platforms to side-step their IT queues by connecting to an external global network for order automation, regardless of what system the entity or transacting party used. The result was straight-through processing of transactions, which lessened risk, time and friction.
Those who have adopted Calastone’s order routing solution are not only realising these benefits but are now moving to solve other market pain points with their network technology, such as managing reconciliations and distributions.

An example is the requirement for fund managers to send statements of holdings and transactions to their platform investors on at least a monthly basis for reconciliation with balance records, which often involves manual distribution by fax, email or web portals.

On the receiving end, platforms require people to collate the statements, enter them into back office systems and reconcile balances.

Unfortunately, manual processes are still part of many end of tax year processes. But fund managers can now electronically send these statements to Calastone, which converts them into an automated feed.

Last year Calastone implemented its reporting solution for fund managers and registries, and by 6 July 2015 these organisations had received automated tax statements, a first in our industry. This process was again shortened this year with statements issued electronically as early as 4 July.

Rather than wait for a government mandate to drive efficiency, the managed funds industry in Australia has sought to automate these areas. Combining innovation with the network effect is a powerful way to optimise efficiency and risk management.

First seen in Financial Observer 29/07/16 (http://www.financialobserver.com.au/articles/opinion-external-systems-can-simplify-eofy)

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