Our Financial Services client faced a challenging scenario with two books of investment business managed on an existing fund administration system. The high costs associated with administering these books outweighed the revenue generated, rendering the operation loss-making. The client contemplated two main options: selling the books or investing in a new fund administration system to achieve efficiencies and return to profitability. This investment was estimated at around £500,000. 

 Our Approach 

We sat down with the fund administration team, coffee mugs in hand, to really get to know them. Imagine us as the ultimate Sherlock Holmes team, reviewing and documenting all existing processes, identifying key pain points and opportunities.  We delved into the metrics, quantifying the current situation to pinpoint problem areas and uncover further opportunities for improvement. 

Our root cause analysis revealed a significant issue. The administration team lacked proper training on the system used to manage the fund. Despite the best intentions of the team, this knowledge gap unknowingly led to data errors. We also discovered that, despite having a maintenance contract for both books, no system bugs or errors were being reported. Instead, internal database administrators manually fixed data discrepancies, introducing additional risks to data quality.  

There were perceived gaps in system functionality, due to differences between the business process and how the system functioned. This had led the administration team to develop workarounds. Whilst these were established with the best intentions (we all like to get a job done), these workarounds unfortunately inadvertently compounded the issues. 

We also identified that the smaller of the two books serving only c.600 investors, required a dedicated system module, which was a significant proportion of the overall system maintenance costs.  We established that economies of scale could not be achieved and concluded that retaining this book was not financially viable.   

Identifying a Strategic Solution 

Upon careful analysis, we recommended a strategic approach to mitigate the financial strain. The first step was to transfer the smaller of the two books to an alternative provider specialising in similar investment products and had the benefit of higher volumes. We supported this process to ensure that there was a communications strategy for the customer base in place and conducted a careful analysis of the transfer process to ensure that investors were not disadvantaged. This strategic move significantly reduced the number of system modules required, thus slashing the monthly maintenance costs. 

Streamlining Internal Processes and Enhancing System Efficiency 

Our collaboration extended to a thorough review of the internal processes. With a modest investment of approximately £10,000 in system development work, we enhanced the system’s functionality, thereby eradicating the need for workarounds. This investment refined the system to fully support the process and enhanced the team’s productivity and accuracy. Whist this development work was taking place the long-standing system bugs were also resolved at no additional charge, under the maintenance contract. 

Enhancing Team Capability 

We recognised that a critical factor contributing to inefficiencies was the insufficient system training of the fund administration team. To address this, we implemented comprehensive training programs, enabling the team to utilise the system effectively. This training prevented new data errors and eliminated the necessity for data fixes. Furthermore, the team learned to report bugs and raise queries with the system supplier, improving the client-supplier relationship and preventing the recurrence of long-standing manual workarounds. 

Achieving Rapid Profitability 

The results of our intervention were impressive. Within six months, we successfully transformed our client’s book into a profitable venture, significantly faster than initially anticipated. By transferring the smaller book and optimising system usage, we reduced the required investment in the fund administration system by £490,000. Our approach not only achieved significant process efficiencies but also markedly reduced monthly system maintenance costs. 

Conclusion 

Our comprehensive strategy, which involved transferring the smaller book, enhancing team training, and streamlining internal processes, led to a swift turnaround in the client’s financial performance. Donning our deerstalkers, we meticulously investigated every nook and cranny, uncovering hidden inefficiencies and solving the mystery of the loss-making operation. 

The reduction in required investment and maintenance costs, combined with improved system efficiency, underscores the value of a strategic and well-implemented approach to fund administration. Our client now operates a profitable investment business, with a well-trained team and a robust system, ready to tackle future challenges with confidence.  

This project exemplifies how targeted interventions and data driven decision-making can lead to significant improvements in financial performance and operational efficiency.  So, if you ever find yourself in a financial conundrum remember, sometimes all it takes is a bit of detective work to find the right solution to turn things around!