Clearing the path to straight through processing

Straight through processing (STP) is being touted as the key to an ideal scenario in equity markets, where planners can automate their operations, reduce costs and eliminate processing error, while upgrading their company infrastructure to accommodate new technological developments.

STP supporters say it’s exactly what fund managers and financial planners have been waiting for. If their vision is realised, transactions requiring traditional forms of communication (fax machines and telephones) will disappear and trades won’t fail.

With STP, a financial planner would be able to send instructions on their client’s portfolio, for example, to sell one fund and invest in another, and receive electronic confirmation once the action has been executed. The swift nature of this process cuts time and cost and it’s expected that the adoption of standards-based electronic commerce can provide cost reductions in excess of 20 per cent for specific transactions.

While the benefits to business are clear, however, the onus is now on the industry to take up the offer. Technology and back-office software provider DST chief executive Ian Mathieson says his company’s interest is in helping the industry adopt straight through processing.

He feels that there is more than one way to define it too: “In my mind, straight through processing conjures up a much broader category of communication. It’s really saying that one transaction could spawn a multitude of effects involving a multitude of parties. We’re a million miles away from it at this particular point in time.

“The best result would be that we become a much more streamlined industry. This is the simple part. But there are hard tasks that prevent us from moving forwards too. For a start, the biggest cost in an industry is people — and the introduction of STP means saying goodbye to staff. It’s a more efficient process but an unpleasant task.”

IWL Financial Advisory Solutions general manager Ross Johnston says that while straight through processing is a new consideration for many companies, it’s already part of IWL’s greater strategy to provide systems for advisers to place orders for specific products through the VisiPlan and VisiWeb software. Their new secure data transfer system between VisiPlan and VisiWeb, VisiTrustedNetwork (VTN), will provide automated data feeds and straight through processing capabilities to users of IWL’s suite of products.

The addition of VTN comes with the latest release of its VisiWeb planning software, which has been redesigned to include recording the lifestyle and financial goals of clients, improved fact-finding tools and straight through processing.

According to Johnston, the way forward is talking to other providers that offer straight through processing and getting the data feeds into a structured network: “What we’re doing is converting those data feeds into a new format — based on industry standards. We’ve taken those standards and we’ve enhanced them.

“Pushing the industry standards is a fairly big job as you have to get everybody to conform to those standards. It’s also quite time-consuming. What we’re trying to do over the next six months is create that transition — we’d like to get all the major providers involved over the next year.”

The Aviva-owned Navigator platform now incorporates STP throughout its operations, to the benefit of the 3,500 financial advisers using the Navigator client management and financial planning desktop for advisers (NLink).

Aviva general manager for marketing and distribution development Paul Minolvi says: “Our portfolio modelling tool allows advisers to group a particular profile of client to that portfolio and with STP, make adjustments automatically. With Navigator’s switching capability, about 30 per cent of all switches are now being performed online. There’s been a terrific response to the tools that are being delivered.”

Mathieson believes that the majority of clients feel they need STP so they can grow their business faster and because they believe it’s the answer to cost reduction. However, there’s also the additional consideration that it’s impossible to implement STP or make it mandatory.

“It’s hard to totally mandate changes for an industry, although you can set standards. What needs to be done is to make a set of guidelines, whereby implementation of those guidelines will create winners and losers. Those who adopt the standards will be winners, those who don’t will be losers.”

From the dealer perspective, Fiducian managing director Indy Singh says of STP that “anything that creates swift transactions without manual intervention is more efficient, so certainly it’s a great concept”.

“We’re looking forward to receiving and transmitting information electronically, but we’re not ready yet…hopefully it will be in this coming financial year,” he says.