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Leveraging Sales and Servicing Data Integration

Mutual fund distributors and manufacturers have traditionally been separate entities. As a result, sales and servicing data are generally stored on different systems at fund companies and their service providers.

Mutual fund distributors and manufacturers have traditionally been separate entities. As a result, sales and servicing data are generally stored on different systems at fund companies and their service providers. The limitations of proprietary servicing applications make the free flow of information to and from multiple platforms a challenge for the industry. In particular, the difficulty of sharing between the back office and front office compromises the efforts of financial advisors, who increasingly play a significant role in managing customer relationships.

Until recently, the goal of sales and servicing data integration was to enable financial advisors to strengthen relationships with clients, ultimately leading to increased fund sales. Now, funds and their broker-dealer partners have a more urgent purpose driving their efforts: compliance with Securities and Exchange Commission (SEC) regulations regarding market timing, breakpoints, revenue sharing and other activities that came under intense scrutiny over the last year.

Funds carry a heavy compliance burden, one that requires them to establish written policies and procedures addressing the requirements of several new and existing federal securities regulations - and to oversee compliance by transfer agents, principal underwriters (brokers) and other service providers.

PFPC offers its transfer agency and subaccounting clients the ability to accurately identify and impose fees and other penalties on short-term traders. Through new offerings integrated within its Global Enterprise PlatformSM, PFPC also offers the capability to compile data from multiple locations, including wrap and brokerage accounts, and apply pre-defined business rules to better position fund companies to comply with securities laws, regulations and fund company policies.

One of the keys to PFPC's strategy is that the open architecture offered by the Global Enterprise Platform (GEP) enables the integration of shareholder account information from multiple back-office servicing platforms with data from industry-standard sales systems (such as ACS, SalesPageTM and SalesVisionTM). This information can be stored and made available through customer relationship management (CRM) applications for use by key account managers or inside wholesalers at the fund who are in contact with the financial advisor.

SEC regulations require advisors and funds to monitor sales activities and identify accounts with suspicious activity. By integrating sales and service data and making it available through a consolidated,Web-based front-end at the fund company, key account managers can make advisors aware of potential violations. For example, if an advisor has just completed three round-trip exchanges in a fund that allows only four exchanges per quarter, the key account manager can alert the advisor, who may not be aware of the impending violation.

PFPC has earned an industry reputation for its ability to adeptly manage vast quantities of data and extract value for funds from their shareholder information. PFPC's market timing detection and deterrence capability is distinguished by its accuracy and customization capability - which adjusts holding periods for each fund, share class or account type, per each fund prospectus.

PFPC can now provide compliance analysis to the industry for a wider scope of funds, including shares held in omnibus accounts at the broker-dealer level. Such accounts, often used for 401(k) plans and wrap products, allow brokerages to buy and sell fund shares in bulk, so the fund cannot see the activities of individual shareholders. Using its GEP open architecture, PFPC has the ability to integrate its technology with partners like Access Data and ACS, which offer sales reporting and data aggregation software. Open architecture is the foundation of PFPC's strategy because it allows integration with multiple sales platforms for maximum flexibility.

In addition to open architecture, PFPC's platform offers products that integrate the sales and servicing data on a single desktop, or "dashboard," so the key account manager or advisor can act quickly on the potential compliance issues. Additional steps can then be taken proactively, such as notifying the fund's Chief Compliance Officer or imposing redemption fees or trading restrictions on a violator.

From a compliance perspective, the benefits are clear: with aggregated details from subaccounting, retirement and managed account platforms, fund management companies can monitor, analyze and take action on trading irregularities, the appropriate use of share classes and revenue sharing - on a daily basis.

But sales and servicing integration is not only for defensive purposes. As competition in the mutual fund industry grew more fierce, the integration of sales and servicing data was becoming a strategic imperative even before the SEC announced its new regulations. Mutual funds need to strengthen relationships with Figure key distributors to diminish their reliance on buying shelf space. Funds aim to provide added value, through key account managers and wholesalers, that leads to increased productivity for brokers. Access to the vast amounts of shareholder account information, integrated with sales data from customer relationship management systems, will be key to this new level of service.

Fee-based advisors in particular are called on to monitor and update their clients on activity across multiple accounts. For example, a common question regards the status of a transfer of assets (TOA) from one fund company to another. That information typically appears on the recordkeeping system, not the sales management system, and an advisor would need to go through several steps to check the status. PFPC's integrated, consolidated TOA tracking system allows that advisor to be more efficient and proactive, strengthening his or her ties with the client.

Presentment of this integrated servicing data is yet another example of leveraging data to ensure compliance. At PFPC, technology is always just the start of the solution. Our experience in managing high-volume, complex fund processes leads to the development of flexible systems that can adapt to changing circumstances. To meet the challenge of the new SEC regulations, funds and broker-dealers may be required to supply data that PFPC's open architecture platform will transform into information used in compliance management.

The tremendous competitive and regulatory pressure facing mutual funds has forced the industry to fundamentally change. The integration of sales and servicing in an open architecture environment is one example of this, and demonstrates how innovative technology can turn a challenge into a business building opportunity.

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Wilmington, DE 19809
[email protected]
Contact: James Nolan,
Senior Vice President and Managing Director,
Product Development

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