WHITE PAPER
INVESTMENT OPERATIONS
FINANCIAL REPORTING REVISITED:
SOLUTIONS FOR A COMPLEX MARKET
TONY WARREN,
HEAD OF STRATEGY AND SOLUTIONS MANAGEMENT,
ASSET MANAGEMENT AND INSURANCE,
FIS’ INSTITUTIONAL AND WHOLESALE BUSINESS
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Financial reporting revisited: Solutions for a complex market
Investors have come to
expect the same degree
of reporting efficacy from
both traditional and
alternative managers.
Efforts by investors and regulators to address opaque
reporting practices have exposed the limitations of
continued, inefficient data gathering across multiple systems
and spreadsheets. The answer: automated solutions capable
of consolidating the disparate sources of information with the
goal of simplifying and streamlining both the financial and
regulatory reporting regimens.
The convergence of traditional and alternative asset classes,
along with an increasingly onerous regulatory climate, has
impacted the efficiency and threatened the accuracy of
fund schedules, investor documents and compliance data,
forcing asset servicers to re-assess their financial reporting
capabilities. In a poll of asset managers and third-party
administrators sponsored by FIS last year, some 60% of
respondents indicated a need to seek alternatives to existing
financial reporting solutions. Similarly, a new survey
conducted on behalf of FIS by Longitude Research entitled
“The Regulatory Pressure Cooker: Assessing Regulatory Stress
in the Financial Services Sector” finds firms increasingly
reaching for more efficient, cross-product and crossjurisdictional approaches in order to comply with mounting
regulatory demands.
Today investors not only require higher quality and more
detailed information around financial statements, they want
to be certain that regulatory requirements are supported in
a consistent and timely manner. Accordingly, asset servicers
require a single, global solution capable of integrating
accounting, financial-reporting and regulatory compliance
functions across both traditional and alternative strategies.
By introducing modern technology into the reporting cycle
data can be easily aggregated, and errors virtually eliminated.
Spreadsheet-dependent
users have found themselves
forced to continually re-input
data and/or re-calculate
ratios and valuations.
Compounding complexities and regulatory
requirements
For many in the asset-management space, reporting
deficiencies have become more prevalent as once-traditional
investors continue to flock to alternatives such as OTC derivatives
and other diverse asset classes. Coincidence? Hardly.
For starters, investors have come to expect the same degree
of reporting efficacy from both traditional and alternative
managers, raising the bar on due diligence and transparency
demands in the process. Additionally, the complexity of these
products places a much heavier burden on back-office
infrastructure, underscoring the fragility of aging legacy systems.
Lack of internal integration has only exacerbated the problem;
when utilizing separate systems for different processes, costs rise
and reconciliation conflicts become more commonplace.
Complicating matters further still is the ever-expanding array
of global investment opportunities, which has compelled
managers to widen their purview to include the numerous
jurisdictions that have piqued investor interest. Nor has the
seemingly endless string of regulatory initiatives made things
any easier. For example, Form PF and AIFMD reporting
require that alternative fund advisors furnish regulators with
significant amounts of information on a more frequent basis.
An imperative to move to automation
All of this highlights the importance of providing financial
reporting that is both consistent and granular, covering the
entire range of the investment portfolio. Even so, a number of
managers continue to buck the automation trend. Excel was
once the undisputed king of number crunching; however, the
intricate nature of today’s cross-jurisdictional, multi-asset
class portfolios can easily overwhelm spreadsheets or other
paper-based processes. As the markets continue to grow
in speed and sophistication, spreadsheet-dependent users
have found themselves forced to continually re-input data
and/or re-calculate ratios and valuations.
In reality, today’s tougher regulatory environment means that
getting up to speed is no longer an option but an obligation
for the asset servicing segment. To satisfy these far-reaching
requirements, data needs to be collected from multiple sources,
making it necessary to automate the data input process. And
because managers must be able to reconcile their own data
with that of their service providers’, streamlined communications
among parties is essential to the compliance process.
In fact, the sheer volume of regulatory requirements affecting
both traditional and alternative managers has compelled many
service providers to devote additional capital to regulatory
specific technology investments. Lyn Marcrum, senior analyst
for Boston-based research and advisory firm Aite Group and
co-author of the report “The Outsourcing Services Landscape
for Investment Managers,” argues that “regulatory pressure will
become a primary driver for investment managers considering
outsourcing some or part of their operations.”
Financial reporting revisited: Solutions for a complex market
Tackling the inefficiencies with newer
technology
FIS’ Financial Reporting solutions
can help
For asset servicers, the days of relying solely on internal
bespoke solutions are numbered, if not gone completely.
Investors and regulators alike are demanding better
technology and transparency, which in turn is driving
managers to seek providers with the tools and skills to meet
these needs.
For decades, FIS has led the technology vanguard for the
asset management industry worldwide and now offers
a global end-to-end solution that automates financial and
regulatory reporting requirements with embedded workflow
and process monitoring.
To date many firms continue to roll the dice by relying
on outdated tools for generating financial reporting
data. Proprietary spreadsheets and other legacy systems,
however, cannot be expected to fulfill modern financial
and regulatory reporting requirements without an increase
in risk or reduction in performance. For those with large
and diverse books of business to monitor, the time has come
to implement more reliable solutions in order to ensure
sufficient transparency into a fund’s portfolio holdings and
financial statements.
By replacing error-prone, high-risk processes with straight
though, fully automated solutions, significant cost savings
and operational efficiencies can be achieved. As the vast
majority of data used to create financial reports is directly
sourced from a firm’s accounting system, a solution that
integrates accounting and financial reporting not only
provides a more detailed view of the underlying portfolio,
it will also streamline the entire process. Using a secure,
web-based platform, managers are afforded the same level
of control as an in-house system, yet at a fraction of the cost.
Technology is only part of the equation, however. Solutions
providers with a verifiable record of accomplishment and
domain expertise stand the best chance of securing the business
of clients seeking to optimize the financial reporting regimen.
The convergence of regulatory disclosure requirements with
the ongoing demand for improved transparency, serves
as a focal point through which tailored investor reporting
solutions can be developed and fine-tuned. Utilizing a single
set of tools to coordinate multi-jurisdictional accounting,
financial reporting and compliance functions goes a long
way towards helping providers maximize efficiency and
increase profitability while also boosting their credibility.
Proprietary spreadsheets and other legacy
systems, however, cannot be expected to fulfill
modern financial and regulatory reporting
requirements without an increase in risk
or reduction in performance.
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Designed to streamline the increasingly complex financial
and regulatory reporting processes on behalf of third-party
administrators and asset managers, FIS’ Financial Reporting
solutions utilize web-based technology capable of handling
both traditional and alternative fund structures. These
integrated solutions lower operational costs while eliminating
the need for disparate systems that can lead to data
redundancies. Both FIS’ Financial Reporting and NSARFiler
can be integrated with virtually any fund accounting platform,
including FIS’ InvestOne, VPM, and Investran systems.
About FIS’ Investment Operations
FIS’ Investment Operations is a global suite of products and
services for asset managers, institutional investors, and
traditional and alternative fund administrators. Investment
Operations supports the entire investment process, from
portfolio management, risk management and compliance to
investment accounting, transfer agency and client reporting.
Combining deep functionality with broad business process
management capabilities, FIS helps investment firms manage
complexity, increase efficiency, and respond quickly to
changing business and regulatory requirements.
About FIS
FIS is a global leader in financial services technology,
with a focus on retail and institutional banking, payments,
asset and wealth management, risk and compliance,
consulting and outsourcing solutions. Through the depth
and breadth of our solutions portfolio, global capabilities
and domain expertise, FIS serves more than 20,000 clients
in over 130 countries. Headquartered in Jacksonville,
Florida, FIS employs more than 55,000 people worldwide
and holds leadership positions in payment processing,
financial software and banking solutions. Providing software,
services and outsourcing of the technology that empowers
the financial world, FIS is a Fortune 500 company and
is a member of Standard & Poor’s 500® Index. For more
information about FIS, visit www.fisglobal.com
www.fisglobal.com
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[email protected]
linkedin.com/company/fisglobal
©2016 FIS
FIS and the FIS logo are trademarks or registered trademarks of FIS or its subsidiaries in the U.S. and/or other countries.
Other parties’ marks are the property of their respective owners.
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