6 December 2005
“50% of Investment Managers have reduced or suspended business with brokers because of poor Operational Performance in the last 12 months”, reports a new survey by Z/Yen, the City-based market intelligence firm. “Investment Managers are becoming increasingly demanding at levels of confirmation and settlement performance and half of them regularly carry out ranking of brokers’ Operational Performance.”
Excellent Operational Performance is also rewarded and is now a significant factor in the “Broker Vote” (the process by which Asset managers allocate business to Brokers):
78% of Investment Managers now say that Operations has an influence in business allocation. Of these, 48% say that good or excellent performance will increase commissions.
Operational Performance of Brokers comprises up to 25% (with an average of 14%) of the “Broker Vote”.
It is also clear that as demands grow from the Investment Management community that the Brokers are responding with better levels of service and more focused customer offerings:
As in 2004, CSFB were ranked best 2005 Operations Bank for Equities with the highest overall score for transaction processing and client service.
ABN AMRO were voted best 2005 Operations Bank for Fixed Income.
The survey also found significant growth in outsourcing of Investment Managers’ operations. Of the 80 Investment Managers interviewed, 15 now outsource all or part of their operations (9 in 2004). Both Investment Managers & their Outsource Agents predict further growth in this area.
Additionally, Investment Managers have invested hugely in technology with over 50% now using OASYS and ALERT. A further 25% are looking to implement FIX over the next 12 to 24 months.
Jeremy Smith, Director of Financial Services at Z/Yen, said, “Investment Managers are very aware of operational service level deficiencies from the Brokers and are increasingly channelling business to those who provide high levels of STP and value-added services. Tolerance of poor performance has disappeared.”
Z/Yen surveyed 80 leading European Investment Managers during September and October 2005. The survey was commissioned by 12 leading Brokers, to help prioritise their customer service needs and to independently assess the views of their Clients.
A summary of results of this study (Operational Performance of Brokers – European Securities 2005) is available here.