How to compete with the giants

With a strong presence in its local US market, Bisys is banking on distribution solutions to crack Europe, writes Roxane McMeeken.

Any US back-office services provider attempting to break into Europe this late into the game will need to offer something a bit different, if it is to succeed.

How else will it compete with the likes of the Bank of New York and State Street? Through hefty investment in technology and acquisitions, these all-American players are now so ensconced in Europe as to be close to being considered one of the locals. But New York-based Bisys has a plan designed to stand up to the back-office giants. The fund services provider is attempting to establish itself as a major operator in Europe by focusing on distribution solutions. The strategy is based on Bisys’ analysis of the European investment industry, which identifies the distribution of financial products as the pivotal issue. The strategy appears to be winning results: Bisys recently signed up Merrill Lynch in Dublin for its transfer agency service. Home market Bisys has a powerful presence in its home US market. The firm handles administration, accounting or transfer agency for $560bn (E480bn)of assets. Although the vast majority is from American clients, $20bn has flowed in from Europe. Bisys was founded in 1989 as a provider of information processing and technology outsourcing services to community banks. Through an aggressive acquisition strategy the company has expanded its competencies. In 2000, Bisys took a key step towards European expansion when it established strategic relationship with Crédit Lyonnais Asset Management. This enhanced Bisys’ fund servicing capability by providing access to a Luxembourg offshore platform. According to George Evans, executive vice president of business development for investment services, Bisys is already the second largest fund services provider in the US, behind State Street. And Mr Evans reveals that through its distribution-focused strategy, Bisys plans to double its $20bn of Dublin-based assets in three to five years. Single package Through its new Distribution Solutions business, Bisys aims to serve clients distributing third party funds by integrating the Bisys product, marketing and sales support services into a single package. The distributors are then provided with a wide range of services, from strategic planning and competitive intelligence to programme development and optimal sales execution. The idea is that a client can outsource the whole process of distribution to Bisys, from the assessment of products being considered for distribution right through to the implementation of wholesaling programmes. However, each service can also be delivered individually. The logic behind the new unit, Mr Evans explains, is that product capability and performance are no longer enough to attract today’s investors, so distribution efforts have become vital. “The lynchpin to our European business is understanding selling agreements”, he says. “We are supporting more than 700 third party fund distribution deals negotiated by our clients. They make the deal and then we spend the money on the technological interfaces to those selling points, and especially to transfer agents.” Mr Evans adds that the lion’s share of Bisys clients in Europe have signed up for transfer agency services, so the plan is to convince them to add administration and accounting contracts as well. The firm’s latest transfer agency client in Europe is Merrill Lynch Dublin, which has handed transfer agency for its new Dublin-based suite of funds to Bisys. Meanwhile UK-based Liontrust Asset Management has outsourced the administration of its PEP and ISA products to Bisys. Other clients include Janus International, Bear Sterns, Credit Suisse Asset Management, Artemis Asset Management and Credit Lyonnais Asset Management. Truly integrated Mark De Sario, director of marketing and product development for Merrill Lynch’s International Managed Assets and Fee Based Business, says that Bisys was chosen due to its “ability to apply innovative thinking to practical business solutions”. In addition, he says that the firm’s willingness to partner with Merrill’s custodian “allows for a truly integrated business structure”. As part of this emphasis on distribution, Bisys has launched a new business line – separately managed accounts (SMA) processing. Bisys is aiming to become a specialist in servicing the back-office requirements of so-called wrap accounts, which combine an investor’s multiple investments financial planning arrangements in a single tax efficient and low fee account. Wraps are well established in the US and just starting out in Europe. This bet on the future growth of worldwide SMA business is a safe one, according to the research firm Cerrulli Associates. It estimates that assets in non-US wrap accounts will grow from E260bn to E390bn by 2007. This includes the flagship Italian fund of funds products known as GPFs (gestioni patrimonali in fondi), which represent the biggest component of the non-US wrap market, with E55bn. Cerrulli says they will reach E211bn in 2007. The Bisys SMA service includes account administration, portfolio accounting and administration, settlement services, billing solutions and reporting. Mr Evans says Bisys is in the process of forming strategic alliances with technology and service providers in order to enhance the service. The aim is to add overlay portfolio management capabilities as well as image workflow technologies, which facilitate straight-through processing by allowing information to be scanned rather than typed.

Bisys in the US Bisys currently supports around 20,000 US banks, investment firms and insurance companies through three business units: 1 Investment Services Group – provides distribution and administration services to 400 clients, representing 1950 mutual funds, hedge funds, private equity funds and other alternative products. Also provides retirement services to 15,000 US companies in partnership with 40 US banks. 2 Insurance and Education Services Group – distributes life insurance and provides support services required to sell life, annuity and disability products. The insurance distribution service is complemented with a compliance management solution that supports insurance and investment firms with certification and training courses. 3 Information Services Group – provides information processing and imaging solutions to over 1150 financial institutions.

Beorge Evans, Bisys