Recurrent delays to fund transfers arising from the continuing use of physical transfer forms are adding unnecessary cost and risk in the Australian managed funds market. That is the findings taken from a survey focusing on asset transfer processing conducted by Calastone involving fund managers, registries, platforms and custodians.
The survey shows that over half of Australian fund transfers processed manually take more than five business days to complete with an additional quarter taking 11 days or more.
The findings are particularly concerning at a time when many firms in the industry are still constrained by the coronavirus pandemic to work from home or operating in a split site model – further complicating the process of dealing with paper transfer forms requiring a ‘wet signature’ and relying on the post to reach their intended destination; simply locating a counterparty to send the forms to can be a big challenge.
Regulators around the globe are increasingly focusing on financial firms’ ability to withstand shocks. They worry that the interdependence of different players means a problem at one business can impact on many others. They want firms to demonstrate they have robust processes in place and fully developed business continuity plans. The more traditional approach of manual workarounds has been found to be unsupportable in times where large portions of the workforce are working from home or multiple locations
The long turnaround times for manual transfers contrast sharply with the experience of firms able to automate their transfers using Calastone Transfers. Here, three-quarters of respondents said they usually completed their transfers in under five days.
Cost as well as risk
All forms of manual processing are people intensive: paper-based fund transfers are no exception. Just under half of the firms surveyed (46%) said they employed three or four people to manage the end-to-end transfer process and a quarter (25%) said they employed five or more.
The problems they encounter are largely down to the need to manage the workflow around paper transfer forms and the requirement by most registries and fund managers for original signatures on these forms. Most will not accept scanned or emailed transfer forms.
The survey highlights other issues, too. Data input or rekeying errors were mentioned by 29% of respondents. One in five (21%) pointed to forms being lost in the post.
All of these issues combine to build additional cost and risk into the transfer process that would also impact the overall client experience.
Widespread demand for more automation
There is near unanimity on how to improve the situation: 96% of survey respondents wanted the funds transfer process automated.
Those that have automated the process point to a variety of benefits: speed of execution, transparency over the status of a transfer, fewer queries and cost savings. Until all platforms, custodians, fund managers and registries are on Calastone Transfers, those that are live will still have to deal with some counterparts that can only process manual transfers. Almost all firms surveyed (95%) said they wanted to see more custodians and platforms on the Calastone network. Two out of three (67%) wanted more fund managers to join.
Industry can modernise to drive out risk
The survey findings are a timely reminder to Australia’s funds industry that it needs to modernise its operational processes. The traditional manual route is cumbersome, costly and risky. A lot of firms will have discovered its limitations only too clearly in the disrupted working environment many now face.
More widespread adoption of proven, automated solutions can speed up execution, improve accuracy and reduce costs. Importantly it can also help firms deal better with shocks in the future and demonstrate to the regulators that their processes are genuinely robust.
The regulatory pressure is unlikely to go away any time soon. Automating processes wherever possible can not only remove some of that pressure but also provide reassurance to customers and counterparties too.
