Does reconciliation pose a big threat to asset and wealth managers?

A study conducted by AutoRek and Worldwide Business Research has found up to 60% of asset and wealth managers view reconciliations as the biggest challenge to their company.

Reconciliation is the process of ensuring that two sets of records are in agreement and is used to ensure that the money that leaves an account matches the money spent.

The survey drew insights from 100 heads of operations across the UK asset and wealth management space and found that manual processing, the availability of adequately skilled staff and appropriate automated systems were the top concerns for these companies.

Of all the manual operational processes, the survey found that a majority of respondents thought reconciliations posed the biggest threat, with AutoRek suggesting that CASS 7 and CASS 6 would benefit the most from automation due to the FCA reinforcing the importance of protecting client assets during the pandemic.

Up to 95% of organisations were found to have a dedicated annual budget for delivering process automation across operational functions, with up to half of them budgeting over £500k. Meanwhile, more than 25% of companies said their budget for delivering operational improvements greatly increased as a result of the pandemic – making it more likely companies will move towards automation.

The top regularly requirements for which organisations wanted greater support from technology were in the areas of operational resilience and prudential regulation. Meanwhile, 98% of organisations said they plan to invest in technology in some capacity to address regulatory requirements in the next 12-24 months, with key focuses on operational resilience, prudential regulation, MiFID II Transaction Reporting and CASS Operations.

AutoRek consultant Murray Campbell said, “These findings echo many conversations we have with clients who themselves are often weighing up this decision. Firms should certainly be mindful that even the best in-house solutions quickly become legacy systems. Outsourcing often gives organisations a better chance of staying ahead of the curve.

“As the regulatory landscape continues to evolve, it is clear that most, if not all, organisations would benefit from external help – not just in the form of an off-the-shelf technical solutions, but consultative expertise as well. Awareness of the availability of appropriate solutions and consultants to introduce automation is a challenge in and of itself.

“The pandemic has been an opportunity for businesses to learn about their organisations in a way few would previously have contemplated. By testing capacities to the maximum, many firms have discovered what they are truly capable of and where they require additional investment and support.

“There are still so many blank spaces in which automation could significantly assist firms’ approach to compliance. One in four firms don’t consider themselves well-placed to meet new IFPR requirements – now two months out from enforcement. A similar amount (31%) reported that they have not invested in an automated solution for achieving IFPR compliance and are not looking to invest in the future. Automation could be of huge help here. Firms that are able to strategically invest in the right tools and advice will reap enormous benefits and alleviate pressures for staff – both in IFPR compliance and beyond.”

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