CHALLENGES & OPPORTUNITIES

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Joel White
6 years ago
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JANUARY 13, 2015 MANAGING FINANCIAL INTERMEDIARIES: CHALLENGES &

2 BOSTON FINANCIAL DATA SERVICES 2014 FINANCIAL INTERMEDIARY OVERSIGHT SURVEY

3 KEY FINDINGS Nearly all participants cited Legal/Regulatory Risk related to intermediary based shareholder activity 70% indicated that their fund boards have increased their focus on intermediary oversight over the last year 3 out of 4 think the new FICCA framework will be an improvement over the initial FICCA announced in % see the need for financial intermediary oversight increasing over the next three years $ 3

4 RISK WHAT RISKS DO YOU FACE RELATIVE TO INTERMEDIARY BASED SHAREHOLDER ACTIVITY? Legal/Regulatory Risk Reputational Risk Financial Risk Not At Risk 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

5 CURRENT STATE My company has a formal intermediary oversight program in place Strongly Agree Somewhat Agree Neutral Somewhat Disagree Strongly Disagree 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% My company's satisfaction level with our current program 100% 80% 60% 40% 20% 0% 13.00% 13.79% 5.88% 47.06% 41.38% 54.00% 45% 47% 33% 34.48% 38.24% 28.00% 5.00% 10.34% 8.82% Highly Satisfied Satisfied Neutral Dissatisfied Highly Dissatisfied 5

6 TOOLS Which of the following tools do you use in your program? Validation of intermediary fee invoices Review/assessment of SSAE16 and FICCA On-boarding process Sales Reporting Questionnaires / Certifications Monitoring through sub account data Remote meetings Tools to capture media mentions On-site visits Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 6

7 CURRENT INVOICE VALIDATION PROCESS Data Used Validation TA Data 89% Fee Rates vs Agreement 96% Assets vs Source Data 93% FI Sub Account Data 78% Invoice Amount Period over Period 85% Period over Period Invoice Data 74% FI Calculation in each row 67% Sales Data 41% Each Row against Independent Calculation 44% 0% 25% 50% 75% 100% 0% 25% 50% 75% 100% 7

8 DUE DILIGENCE QUESTIONNAIRES / VISITS 100% Intermediary Response to Due Diligence Questionnaires 80% 60% 40% 20% 0% Promptly Gentle Reminder Multiple Followups Senior Mgmt/Firm CCO Escalation Not Completed 0 to 20% 20 to 40% 40 to 60% 60 to 80% 80 to 100% 8

9 OMNIBUS CONVERSIONS Omnibus Conversions Conditions That Resulted NO YES 82% said firm agree to provide fund with subaccount position and activity files 65% identified new fees for the business 59% received firm support for oversight program 9

10 FUTURE NEEDS How do you anticipate the need for intermediary oversight to change over the next three years? Increase Significantly Increase Slightly No Change Decrease Slightly Decrease Significantly 0% 20% 40% 60% 80% 100%

11 DRIVERS What is driving the increased need for intermediary oversight? SEC Fund Board Senior Management Business Model Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

12 FUND BOARD INTEREST Has your fund board increased its focus on your intermediary oversight program over the past year? 30% NO YES 70% 12

13 WHAT FUNDS BOARDS ARE REQUESTING Understand the intermediary oversight program Services being provided and the fees associated with those services Several participants provide regular updates to the board 13

14 EXPECTATIONS FOR FICCA % 12% 12% Other No major difference Somewhat Better Major Improvement 61% 14

15 MAJOR CONCERNS & CHALLENGES To properly address oversight, there is a major resource commitment getting intermediary to provide FICCA time & resource constraints RESOURCES, STAFFING & COSTS INTERMEDIARY ACCESS & COOPERATION intermediary cooperation costs involved push back from firms 15

16 QUESTIONS Mike McNeill Ken Larsen 16

17 Boston Financial Data Services, Inc. (Boston Financial) has provided the information in this Presentation for general informational purposes only, has a right to alter it at any time, and does not guarantee its timeliness, accuracy or completeness. All obligations of Boston Financial with respect to its systems and services are described solely in written agreements between Boston Financial and its customers. This document does not constitute any express or implied representation or warranty by Boston Financial, or any amendment, interpretation or other modification of any agreement between Boston Financial and any party. Boston Financial hereby disclaims all warranties, either express or implied, including the warranties of title, merchantability and fitness for a particular purpose. In no event shall Boston Financial or its suppliers be liable for any damages whatsoever including direct, indirect, incidental, consequential, loss of business profits or special damages, even if Boston Financial or it suppliers have been advised of the possibility of such damages. This Presentation and the material contained herein, which may refer to the computer systems, procedures, data bases, software programs, process specifications, documentation and other materials (collectively Information ) created, maintained or provided by Boston Financial are proprietary to Boston Financial and are confidential. No part of any Boston Financial Information may be reproduced, stored, disseminated or used, in any form or by any means, mechanical, electrical, or otherwise, without the prior written permission of an officer of Boston Financial. Each authorized reproduction of any part of Boston Financial Information must contain notice of Boston Financial s copyright as follows: Copyright 2014 by Boston Financial Data Services, Inc Boston Financial Data Services, Inc. is a registered trademark of Boston Financial Data Services, Inc. Third-party brands and names are the property of their respective owners. All rights reserved.

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