Murray Bender: RBC Investor & Treasury Services is pleased to present insights on the future of asset and payment services across the globe. Today’s podcast features Ben Pumfrett, Head of Middle Office Product Management at RBC Investor & Treasury Services, continuing our discussion on the Investment Book of Records, today focusing on oversight.
Thanks for joining us, Ben.
Ben Pumfrett: Thanks, Murray. Good to be here again.
Murray Bender: Ben, in our recent podcast, you mentioned how an Investment Book of Records, or an IBOR, helps asset managers provide oversight for their operations. Why is this important for managers?
Ben Pumfrett: So, I think, Murray, as we spoke about last time, the IBOR, Investment Book of Records, really acts as that consolidation of data and that single point of truth across multiple sources and providers the asset manager has. So it really acts then as that point where that control and oversight can be taken from and act as that key data source for asset managers to perform much of their oversight responsibility looking at overdrafts, data integrity and exceptions across their books of records.
Murray Bender: What are some of the challenges faced by asset managers in achieving this operational oversight?
Ben Pumfrett: There are several. I mean, firstly, it’s that identification and consolidation of the required data points. You know, asset managers have a lot of data internally and often have multiple service providers. So bringing that data together and being able to get a consistent view and a timely view of that data to really perform that oversight on an intraday basis is one of the challenges. And that’s certainly, as we mentioned before, where the Investment Book of Records can really help create that single point of truth for a lot of that data.
I think another point is how asset managers are having to consolidate that data. And often that’s bolting bits of data together, and that creates a bit of a fragmented model in terms of their oversight solutions. So to have that scale and robust oversight solution, we really need that data consolidation in that single place.
I think one of the other challenges that we often see from an oversight point of view is actually that retention of knowledge within the asset manager and the business. When activities are outsourced, particularly to service providers, sometimes some of that business knowledge is lost. And how do the asset managers keep that business knowledge up to date in the house, really being able to understand how that service provider is doing that activity that’s outsourced, for them to have comfort and control that it is being done well.
As we’ve seen, really the regulators are pushing asset managers globally to be able to prove and demonstrate that oversight model. And as we see, you can outsource the process, but you can’t outsource that responsibility.
So that oversight framework that’s needed by asset managers is key and, therefore, retaining that business knowledge to be able to actively monitor and challenge the service providers that are doing that is often a challenge for the asset manager. So what we’ve seen is those asset managers looking to work with their service providers, to really understand the details of the process so they can get comfortable as that activity’s being performed. And also, more and more for that activity to be viewed intraday rather than just sort of an end-of-day check that that activity has been completed.
I suppose the very last point is really from an oversight point of view, is to have that consistent framework for oversight. So asset managers do have multiple providers, multiple functionalities being performed, and they really want to try and construct a consistent risk-based framework across all their activity on how they can monitor and demonstrate that. And it’s really the use of those key data points on an exception basis that they want to focus on.
Murray Bender: So how does an IBOR help managers actually meet their oversight requirements and deal with some of these challenges that you were just referring to?
Ben Pumfrett: So I think often, when we see asset managers looking to do oversight, historically, what we’ve seen sometimes is them actually repeating that process they’ve outsourced to check it’s done correctly. And obviously, that’s not an efficient way to do it. And you never get the benefits of that outsourcing if that’s the approach.
So as we sort of touched on before, the IBOR actually consolidates a lot of those data points. It’s creating that single point of truth and then, by having that data all in one place, the focus is to then use that data to really highlight those exceptions, to make that oversight as efficient as possible. So the focus is on actually resolution not identifying those exceptions.
And technology is definitely helping to do that. And I think we’re seeing multiple times that, you know, a technology may have been put in to assist with managing that data and highlighting those exceptions, whether that’s through visualization tools or active alerting, and the expectation now is for those service providers to help with that by providing that toolkit and technology to help clients be able to achieve those oversight goals.
Murray Bender: So finally, Ben, to what extent are managers’ oversight requirements evolving? And how is the IBOR responding to these changing needs?
Ben Pumfrett: I think what we see with the oversight requirements is different personas have different requirements from an oversight perspective from our client. So we have those COOs, or Investment Operations Managers, who really want that high-level dashboard sort of flagging potential issues and fires up front. So they’re looking for that more holistic view across multiple functions and how do they fit that in from a dashboard and really just focus on those key items to them.
We also have probably more the oversight team and individuals that are looking at particular functions at the asset manager, and that’s where their specialty or SME knowledge is. And for them, they want a much more granular level of detail to be comfortable. So we have to facilitate that within our service and our oversight screens to be able to give both and meet both of those personas, as well as often, from a front-office view, actually using data to help the investment managers from an investment decision point of view. So stuff like cash forecasting; they want to know that that data’s true, and accurate and any exceptions are flagged and well-communicated.
I think also there is that push for more of a real-time data set. So intraday, to receive that data, being able to see how the process is going through the life cycle, so at any point in the day, they can see where a trade is in a life cycle and potential issues. So it’s moving away from that sort of end-of-day, end-of-week reporting in terms of making sure KPIs are met.
And then the last is that technology point. So how do we make that really efficient for the clients to absorb? And so those visualization tools, that allows clients to apply their own rules based on their risk appetite, allows much more flexibility for them to just really highlight those items that are important to them. So from a recs point of view, say, they can just target materiality of those breaks and the age of those breaks. So they lose some of that noise of very sort of immaterial breaks that traditionally with service providers has been reporting in terms of long PDF reports.
Murray Bender: Thanks for sharing your insights on IBOR and specifically around oversight, Ben. We really appreciate your time.
Ben Pumfrett: Thank you very much for the opportunity, Murray.
Murray Bender: Today’s podcast has been brought to you by RBC Investor & Treasury Services. We hope you found it useful. For additional insights on the future of asset and payment services, including our previous podcasts, visit rbcits.com/insights.
I’m Murray Bender. Thanks for joining us today.
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