Poor Operational Performance Loses Business For Brokers

“Two thirds of Asset Management companies have suspended business with brokers because of poor Operational Performance”, reports a recent survey carried out by Z/Yen, the City-based consultancy firm. “Additionally, Asset Managers are investing heavily in new systems to increase the efficiency of their securities back-office processing and as a result, the influence of Operational Performance in their choice of Brokers is on a steeply increasing curve”.

Operational Performance is a growing factor in the “Broker Vote” (the process by which Asset managers allocate business to Brokers):

• 68% of Asset Managers reported instances where they have suspended trading with Brokers due to poor Operational Performance.
• 70% of Asset Managers formally rank their Brokers based on Operations Performance and regularly distribute this information to Fund Managers and Traders.
• Operational Performance of Brokers comprises up to 35% (with an average of 14%) of the “Broker Vote”. This degree of influence is on a sharply increasing trend.

Service level demands from the Asset Managers are also rising, in particular, confirmation delivery & accuracy and customer relationship management (CRM) services from the Broker:

• 90% expect electronic trade confirmation for all securities products across all global markets. There is little tolerance of Brokers who cannot provide this service.
• 90% of Clients expect a centralised Operations CRM function at each Broker, staffed by individuals who are accessible, knowledgeable, client focused, have clout within their organisations and who can “resolve issues rather than acting as a post-box”.
• However, only 3% placed high importance on availability of Brokers’ systems via the Internet. Asset Managers feel that Internet applications tend to disrupt their workflow.

In a clear display of commitment to reducing processing costs, 73% of surveyed Asset Management companies are currently implementing new systems aimed at improving straight through processing (STP); 60% are either implementing Financial Information eXchange (FIX) protocol or performing feasibility studies, and 46% are committed to or are currently evaluating a Central Trade Matching initiative.

Jeremy Smith, a Director at Z/Yen, said, “The Asset Managers are acutely aware of Operational service levels currently provided by the Investment Banks. We believe that as their new systems are implemented, any remaining tolerance of poor performance will disappear.”

Z/Yen surveyed 31 leading UK-based Asset Management companies (Clients) during November 2002, to assess Operational Performance requirements. The survey was commissioned by six leading Brokers, to help prioritise their customer service needs and to independently assess the views of their Clients.

For further information, please contact Jeremy Smith,
Tel: (020) 7562-9562,
E-mail: jeremy_smith@zyen.com.

^{Z/Yen specialises in risk/reward management, an innovative approach to improving organisational performance. Z/Yen’s clients include blue chip companies in banking, technology and professional services as well as charities and care organisations.}