One measure of the efficiency of Europe’s fund industry is to look at the time taken to transfer client funds from one platform to another. It has long been recognised that the process can be a slow one. Now we know how slow.
A survey by Calastone of 32 leading investment managers, distributors and platforms across Europe and the UK showed that nearly a third of fund transfers (32%) took two weeks or more, with one in five taking three weeks or longer.
Italian firms were fairly typical, with a third of respondents saying transfers usually two weeks or more to complete. Across the survey group as a whole, less than half of respondents said transfers usually got completed in under five working days.
And yet … around two thirds of firms said they had the technology to send or receive automated transfers, which would normally cut the time down to a day or two at most. Luxembourg firms, for instance, mostly had the required automation in place. So how to explain this strange dichotomy?
Automated transfers still a fraction of the total
The survey found that across Europe only around one in six firms (16%) was actually sending and receiving automated transfers – which overall accounted for no more than 1% to 2% of their transfer volumes.
Firms cited several reasons for this. First, there was a lack of standardisation, particularly for cross-border transfers. Several respondents said they had difficulty integrating their IT with counterparties’ systems. Others remarked that their internal systems were not set up to automate the process.
A common complaint among those that were automated was that counterparty coverage was patchy – so they fell back on good old manual processing, perhaps aided by optical character recognition to help process faxes.
Solutions ready and available
The reality is this should not be necessary. There are easy-to-deploy digital solutions available that not only automate the process but can talk to other systems and deal with different jurisdictions and standards. Connectivity issues should be a thing of the past.
It may well be that firms have been slow to pick up on the benefits automation can bring and how uncomplicated the path is to achieve it. Yet everyone contacted in our survey could see the merits of automation – particularly in speeding up execution and eliminating processing errors.
As it is, the pain is palpable. Firms mention several reasons why manual transfers take so long, but the principal one – mentioned by 90% of Luxembourg respondents, for instance – is down to data input/rekeying errors. Then came the need for paper forms or wet signatures followed by documents going missing in the mail.
The scale of the problem varies firm by firm. But almost a quarter of firms said they were processing between 100 and 500 transfers manually each week – and one in eight processed more than 1,000 in the same time frame. Apart from constituting a drag on back office resources, long settlement cycles impact the ability of the investor to deal while their funds are in transit.
The solution is out there: greater adoption – and usage – of the available automated offerings would bring huge benefits both for industry participants and their clients. It would constitute a win-win for all concerned, and it should be remembered that transfers mostly occur when clients change providers. If the migration goes wrong or is delayed, you won’t get a second chance at making that positive first impression…
Calastone has always been at the forefront of the industry when it comes to fund transfers. By challenging the established processes, we have accelerated the transfer process across the globe, reducing the time frame from weeks to hours. This minimises time out of the market for the investor and helps firms make an instant impression on new clients with the quality of their service.