March 2003
Poor
Operational Performance Loses Business for Brokers
“Two
thirds of Asset Management companies have suspended business with brokers
because of poor Operational Performance”, reports a recent survey carried out
by Z/Yen, the City-based consultancy firm.
“Additionally, Asset Managers are investing heavily in new systems to
increase the efficiency of their securities back-office processing and as a
result, the influence of Operational Performance in their choice of Brokers is
on a steeply increasing curve”.
Operational
Performance is a growing factor in the “Broker Vote” (the process by which
Asset managers allocate business to Brokers):
-
68%
of Asset Managers reported instances where they have suspended trading with
Brokers due to poor Operational Performance.
-
70%
of Asset Managers formally rank their Brokers based on Operations
Performance and regularly distribute this information to Fund Managers and
Traders.
-
Operational
Performance of Brokers comprises up to 35% (with an average of 14%) of the
“Broker Vote”. This degree
of influence is on a sharply increasing trend.
Service
level demands from the Asset Managers are also rising, in particular,
confirmation delivery & accuracy and customer relationship management (CRM)
services from the Broker:
-
90%
expect electronic trade confirmation for all securities products across all
global markets. There is little
tolerance of Brokers who cannot provide this service.
-
90%
of Clients expect a centralised Operations CRM function at each Broker,
staffed by individuals who are accessible, knowledgeable, client focused,
have clout within their organisations and who can “resolve issues rather
than acting as a post-box”.
-
However,
only 3% placed high importance on availability of Brokers’ systems via the
Internet. Asset Managers feel
that Internet applications tend to disrupt their workflow.
In
a clear display of commitment to reducing processing costs, 73% of surveyed
Asset Management companies are currently implementing new systems aimed at
improving straight through processing (STP); 60% are either implementing
Financial Information eXchange (FIX) protocol or performing feasibility studies,
and 46% are committed to or are currently evaluating a Central Trade Matching
initiative.
Jeremy
Smith, a Director at Z/Yen, said, “The Asset Managers are acutely aware of
Operational service levels currently provided by the Investment Banks.
We believe that as their new systems are implemented, any remaining
tolerance of poor performance will disappear.”
Z/Yen
surveyed 31 leading UK-based Asset Management companies (Clients) during
November 2002, to assess Operational Performance requirements. The survey was
commissioned by six leading Brokers, to help prioritise their customer service
needs and to independently assess the views of their Clients.
For
further information, please contact Jeremy Smith, tel: (020) 7562-9562,
e-mail: jeremy_smith@zyen.com.
Z/Yen
specialises in risk/reward management, an innovative approach to improving
organisational performance. Z/Yen’s
clients include blue chip companies in banking, technology and professional
services as well as charities and care organisations.
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