SwimEC: lifeline or flotsam?

The new Super, Wealth and Investment Management Electronic Commerce initiative (SwimEC) standards released in April provide the framework for automated electronic payment of member contributions. But what does it all mean for advisers?

Need for universal standards

Last year in Money Management, Peter Philip of Investment Link questioned the uptake of straight-through processing (STP), which for years has been touted as the ‘nirvana’ of fund administration. He related it to the failure of fund managers and platform web sites to generate serious usage by advisers.

One of the reasons for this was the lack of a universal standard to facilitate electronic commerce, and the fact that the adoption of most new technologies is subject to what’s known as ‘network effects’, which is a long lead time followed by explosive growth, meaning the bulk of people sit on the sidelines until there’s a critical uptake of the technology.

It is only now, with the release of the new electronic commerce guidelines for automatic payment of member contributions by SwimEC in April, that we are beginning to see real, practical adoption of technologies and standards to facilitate STP. But it’s a long way from universal use yet.

Super contributions

One of the biggest industry-driven technology initiatives in the choice environment, the SwimEC guidelines are aimed at enabling a single standard for the automatic payment and confirmation of all member contributions between the employer or member, adviser, fund administrator and the bank.

Advisers can benefit from reduced administrative costs and better data integrity by being involved with the right dealers — dealers who provide paperless desktop services.

For example, boutique manager Fiducian Portfolio Services provides its own adviser desktop, which is linked back through to its administration system. Astarra Funds Management is another manager that, along with partner BankWest, is making it easier for employers to pay contributions electronically, which is all very positive for the financial services industry.

If a planner is associated with such a dealer, statements of advice (SOAs) can be produced in a matter of minutes rather than days. The planner can download the platform application from their office and then have the client digitally sign the application. The application can then be scanned back to the platform, and within a few minutes, the adviser has a deposit slip that is SwimEC compliant. The deposit slip can be paid via BPAY or direct deposit to the platform.

Not only does this dramatically speed up service to the client, it also reduces the chance of lost cheques or fraud.

Straight through processing

A lot of activity today in the STP arena is what can be called ‘manual STP’, where a person will load data from one system into another system, simulating STP. Only a few providers today have the capability of true STP for real-time data activity.

However, electronic sharing of information is likely to become the norm in the next 12 to 18 months because of the need to deliver quality, timely and accurate data to achieve cost savings, compliance and improved customer service. Any fund still relying on manually-keyed information as their primary data input source should seriously reconsider their processes.

To achieve economies of scale, there is an increase in co-operative activity at the moment between different organisations looking to share information electronically.

Bert Van Manen, an authorised representative of Genesys Wealth Advisers, says everybody wins in the electronic commerce scenario — funds, clients and advisers.

“It reduces costs for clients by reducing our paperwork and manual data entry,” he says. “It also reduces costs in terms of being able to get clients’ money invested more immediately. It’s crazy in this day and age that you can send a withdrawal form to a fund and it still takes seven to 14 days to get the money into the client’s account.”

Legacy leftovers

However, as with the introduction of any new data interchange standard, there is still a lot of work to be done.

Van Manen sees the biggest issue with the industry as being the number of funds with legacy systems in place. “A lot of funds have a large number of products on different systems, which makes it very difficult to create an integrated solution which gives advisers access to all clients’ records on all products, and that facilitates electronic transactions.”

Clearly, those funds running an integrated system that doesn’t require re-keying of data will be more quickly able to integrate the standards to their benefit.

The challenge of introducing the SwimEC standards is that legacy technology cannot support the new standards simply and cost-effectively. Dated technology requires third party middleware to extract and input data, usually not in real time, with no validation processing rules available, and often with manual intervention, which can reduce the benefits.

Astarra’s Rex Phillpott agrees, and says planners should be looking to their dealer group to ensure they are offering an electronic adviser desktop that links electronically through to the platform, and has a full electronic service to transact with a platform using SwimEC standards.

Electronic benefits

Winners in the race to electronically accept contributions and information will be advisers using dealer groups that have technologies to support open systems standards, real-time processing and validation rule processing for possible exceptions. The losers will be planners working with funds using technologies that are lagging behind industry standards.

However, it is still early days. There needs to be time for all parties to examine the standards, and there will be a time lag before all players come on board to make them a truly useful tool.

One thing is certain, regardless of standards, the days of entering information manually between different systems are numbered.

Kurt Groeneveld is managing director of Supercorp Australia .