UK Funds - The Future

What is the future for fund administration and its participants?  My observations are hardly ground breaking, so the following is more of a conversation starter:

Competition – in fund admin’ the historic big players are being jostled by acquisitive disruptors who will soon benefit from growth economies as they consolidate and rationalise.  The UK market is now almost completely outsourced and innovative providers can win market share by offering one stop solutions across products, functions and markets.  Some people churn is likely in the short to medium term as this process unfolds.

Smaller Players – smaller ACD/TPA operations looking to grow organically need to perform at high levels to prove that small really is beautiful.  Dedicated service, technical know-how, flexibility and the ability to respond are key selling points in winning and retaining clients.  They hire industry specialists who have strong functional expertise and client facing skills, but can also produce results in the absence of structural cushion.

Control/Compliance/Oversight – the importance of strong KYC & AML regimes has never been higher, whilst the role of investment risk oversight has received its share of the spotlight recently.  Those of us predicting a trend towards reshoring administration have been proved wrong, instead control and oversight regimes have been strengthened to protect the offshore model.  Candidates with a strong fund administration background can make the transition to oversight roles, but they need to be all rounders with a strong grasp of regulation and its application - COLL, COBS, CASS, for example.

People Market – a tight recruitment market has led to the introduction of some strong talent retention measures amongst canny employers.  Improved training & development whilst encouraging internal mobility provides the reward to the employer of a more experienced and motivated workforce.  Flexible working is a key requirement for most candidates, but we hear that a number of employers are now being more persuasive in getting employees back to the office.  One large financial services company has based part of their senior management teams’ bonuses on achieving higher numbers at desks.  Hybrid working models are set to stay for the foreseeable future though and there is some evidence that the most flexible employers are having better success in attracting talent.

Systems – will inevitability have an effect on job numbers in the funds industry.  Only last week, The Times reported that “fund managers could be added to the list of endangered professions”, citing an experiment where an AI built fund outperformed the top 10 UK funds over a period of 8 weeks.  In fund administration we are seeing Transfer Agency, for example, becoming increasingly digitalised; oversight applications across all functions have also been replacing the human eye for some years now.  Rest assured though, that trusted experience and the ability to build relationships remain key to our industry.

Quality – of fund administration has in the main improved since the financial crisis of 2008, partly enforced by regulators, but also on the back of some of the initiatives described above.  De-skilling and offshoring had the required cost effect, but came with attached risk (financial, regulatory and reputational).  TPAs looking to minimise liability have improved training, processes and controls; management companies are now used to the concept of non-abdication and have long established the required layers of compliance.  As a result we have an industry full of highly trained, knowledgeable and adaptable participants, able to cope with the next change that will surely come.