Navigating Financial Challenges: Defining a Faster Route to Profitability

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 to be the ultimate Sherlock Holmes team, reviewing and documenting all existing processes, identifying key pain points and 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. This knowledge gap inadvertently 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. Workarounds for perceived gaps in system functionality compounded the issues. 

We also identified that the smaller two books serving only c.600 investors, required a dedicated system module, which was a significant proportion of the overall system maintenance costs.  As economies of scale could not be achieved, we 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 higher volumes of similar investment products. This strategic move significantly reduced the number of system modules required, thus slashing the monthly maintenance costs. 

Enhancing System Efficiency and 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 resolving long-standing issues that previously necessitated manual workarounds. 

Streamlining Internal Processes 

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 remaining workarounds. This investment refined the system to fully support the process and enhanced the team’s productivity and accuracy. 

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. 

Understanding the Root Causes 

Our initial step involved getting to know the fund administration team intimately, understanding their daily operations, and documenting all existing processes. This groundwork allowed us to pinpoint key pain points and opportunities for improvement. Our root cause analysis revealed that the admin team lacked adequate training on the system, leading to misuse and the accumulation of data errors. Furthermore, despite having a maintenance contract, no system bugs or errors were being reported, as the internal database administrators manually fixed data errors, posing further data quality risks. 

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. 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 case study exemplifies how targeted interventions and strategic decision-making can drive significant improvements in financial performance and operational efficiency.