Administration. The word might not conjure up the most exciting elements of structured investments, but it's nevertheless an essential part of trading.
Our core focus at Affinity Capital has been optimising administration for structures trading between offshore life companies and investment banks, bringing benefits to all parties involved in the process.
But why is it so important to ensure the organisation of structured investments is handled efficiently? Here are some of the ways that better administration not only boosts individual trades themselves but also the wider industry.
In the not-so-distant past, the administration of structured investments for offshore life and insurance firms was extremely chaotic.
Optimising administration has enabled investment banks to dramatically improve their services and offer a much wider selection of products.
Multiple instructions would get faxed individually from the client to an investment bank's trading floor, where hundreds of traders could potentially be sharing one working fax machine.
These instructions would then need to be manually inserted into a recording system, with any necessary reports created and sent to clients with a quick turnaround. Unsurprisingly, this creates a huge workload for talented traders who could be putting their skills and expertise to better use.
Systems such as Affinity Capital's FinTech platform, ACE, automate these processes, removing the administrative burden and enabling firms to reallocate human resources to more growth-oriented areas of the business.
Automating the way in which investment banks record and reconcile orders helps mitigate one of the key problems that traditional structures administration suffered – human error.
On hectic trading floors, with salespeople under considerable workload pressures, it's easy to see how instructions and orders can get lost or forgotten. These issues were exacerbated when many organisations were forced to reduce their headcounts following the global financial crisis.
Errors would lead to breaks in settlements, payment delays, compliance issues and subsequent fines. Understandably, client relationships would suffer and the reputation of structures as a sound investment also declined.
Innovative trade recognition and reconciliation software and other administrative efficiencies have essentially eliminated these issues within the space.
The manual burden of traditional administration processes, as well as the proliferation of errors and costs associated with maintaining such systems inflicted a heavy toll on the structures industry.
Offshore life companies and banks simply decided that these products often weren't providing attractive returns, leading to less demand and fewer organisations offering high-quality investments.
Optimising administration has enabled investment banks to dramatically improve their services and offer a much wider selection of products, encouraging more clients to invest.
Where investment banks had previously moved away from structures to take advantage of lower-hanging fruit, we are now seeing an increasing number of firms re-enter the industry and foster growth.
Better administration doesn't just deliver more players into the space. Revolutionising the framework for structures trading has made these investments cost-effective for investment banks and affordable for clients.
Enhancing administration processes across structures trading has provided significant benefits for both investment banks and their clients.
Financial institutions have made considerable savings by outsourcing administration to firms like Affinity Capital that can streamline the process from end to end. Banks can pass on these savings by making each trade more competitively priced.
Our independent pricing models and extensive panel of investment banks have also allowed us to achieve further cost benefits for clients via a wholesale approach.
Ultimately, enhancing administration processes across structures trading has provided significant benefits for both investment banks and their clients, resulting in fewer errors, better market access and cheaper products.
These advantages have created a step change in the market that has allowed the structured markets to grow, delivering an exciting addition to many investors' portfolios.