Distributors ponder fax-free future
Guided architecture will require major investment in new technology platforms by distributors wishing to gain a share of the funds market
When PWM was launched nearly three years ago, the open architecture debate was still in its infancy. But the market has moved on significantly since European giants Credit Suisse and UBS decided to open their shelves to a variety of third-party products.
The new ‘guided’ model, already embraced by Commerzbank, Deutsche and ABN Amro, allows for selection of a limited number of preferred providers, whose specific funds are then marketed to private clients. This Continental model is also likely to come into effect in the UK next year, when regulations will permit retail banks to sell a variety of mutual funds. HSBC has already announced its desire to follow the Germans and Dutch.
Untried activities
But if banks and other distributors are selling investment funds, in addition to their bread and butter business of bank accounts, mortgages and credit cards, how will their systems cope with a previously untried activity?
Stock markets will eventually re-discover their momentum. When this happens, banks, transfer agents and fund promoters may be swamped with paper as volumes rise. The truth is the majority of these deals are still based on a clerk in the back room of a bank sending a fax to order some investment products for a client. The system works relatively well when there is just one fund provider to deal with, but when there are seven or eight, based in different countries, problems arise.
Our cover story this month looks at the investments in technology platforms that private banks need to make in order to sell third-party products. Banif, the private banking subsidiary of Santander, has developed its own proprietary technology for these purposes. This is also being used in other parts of the group. Spain’s Santander is bidding to take over UK high street bank Abbey. Abbey is the UK’s prime mover in outsourcing and open architecture. Crucially, Santander’s case to Abbey’s shareholders is focusing on group savings regarding technology systems. HSBC Private Bank, on the other hand, has chosen to buy an external technology tool from Brainpower. This theme of accessing the correct technology platforms ties in with SWIFT’s annual Sibos conference, to be held in Atlanta, US from 11-15 October. PWM will have a significant presence at this event.
Fund promoters also need to address their relationships with clients and whether they have the correct support from their transfer agents and technology providers. If distributors are providing them with increasing numbers of small clients, can they afford to supply clients with all the necessary documentation required by regulators?
