Robots in Fund Administration, Really.

>Robots in Fund Administration, Really.

Robots in Fund Administration, Really.

By | 2019-10-28T11:46:31-04:00 June 26, 2018|Data Management|

An analysis of robotic technology benefits in fund administration for Investment Advisers – which also begs the question – is your service provider employing robots to stay ahead of the technology curve?

Robots in Fund AdministrationThe thought of using robots in a data driven business like fund administration can seem strange or out of place on the surface.  Whenever the idea of utilizing robots to improve efficiencies and reduce risk is mentioned, the typical question is ‘What role can robots really play in a business that is driven mainly by the flow of data and information’?  Unlike industries such as the automotive industry where robots play a major role in assembly and quality control, it may seem difficult to draw parallels to robots performing similar functions in fund administration.  Nevertheless, those parallels exist, and robots are starting to play major roles in businesses like fund administration, driven by the flow and analysis of data.  And while the benefits within a service provider, such as increased efficiency, transparency, and reduced risk can be expected, robots also provide benefits for investment advisers through improved data, increased customization, and enhanced and faster delivery methods.

Bots and Processes

RobotFirst, it’s important to understand what is being referred to when discussing ‘robots’ (often simply called ‘bots’) in this context.  These bots are not made of gears and metal, but rather of program code that is sitting on a server.  They don’t manufacture goods, but instead monitor and process information to perform a service.  They facilitate data flows, monitor for events, collect and analyze information, and process large amounts of data in short time frames.  Their ‘job’ is often referred to as Robotic Process Automation (RPA), and when used correctly can greatly improve efficiencies and reduce risk in the fund administration space.

Robotic Process Automation should not be confused with the generic term ‘Automation.’  Automation in general refers to user-driven triggers to kick off an automated process.  Think of programs like Excel Macros or Access Databases that require a user to start a job that performs an automated task.  These processes often require a user to import or export data by clicking buttons and navigating to locations, essentially aiding the automation to locate data, and start processing it.  While this type of automation will improve the flow and accuracy of data, it is hindered by one major aspect – it is user driven.  It requires a user to start the process, identify the data source, and then verify the results.  All of these components create bottlenecks in the process and are still plagued with the possibility of human error.

RPA, on the other hand, does not require a user to perform its functions.  Once the bots are programmed, they can essentially replace the user aspect in aiding and overseeing the automation.  They are not hindered by time constraints and can even run 24 hours a day.  Bots can monitor multiple locations for events (e.g. the arrival of an email, a data file being received to an FTP site, a change or update to data on a database, etc.), and react to these events without any human intervention. 

Bots in Action—Trade Processing

Bots for Data Enrichment, Interface EnhancementA good example to explain how this works in the fund administration space is the trade processing function.  Typically, a service provider receives trades from the adviser via email or SFTP in a file type such as Excel, Text or PDF.  Once received, these trades must be reviewed for accuracy, processed in the fund accounting system and then reconciled against the original trade file. Below is a breakdown explaining the different process levels:

  • Manual Process: requires a user to monitor the location where the trade file is expected to be received, open the file once received, manually enter the data into the fund accounting system, and then perform a manual reconciliation between the system and original trade file. This is a low efficiency, high risk process due to the bottlenecks, high touch points and human interaction.
  • Automated Process: still requires a user to monitor the location where the trade file is received, at which point they would use an automated utility (Excel, Access) to pick up the trade file and process it into the accounting system. The user must also review the data and confirm that everything was processed correctly.  This could be considered medium efficiency and medium risk as there is still considerable human intervention involved in moving the data from the original source to the accounting system.
  • RPA: eliminates the user from this workflow altogether. The bots monitor the location the trade file is expected to be received.  Once received, the bots immediately scan the trade data in the file for accuracy, process the data into the fund accounting system, perform a reconciliation to the original trade file, and store all data in a trade database for future analysis/review.  This is all done in mere seconds.  Any inconsistencies (e.g. incorrect format on trade file) or errors (reconciliation break) are immediately reported to the end users for review.  This is a high efficiency, low risk process.  The human element has been removed from the data processing and replaced with a bot that can review and process data much faster.  Bottlenecks have been removed and a new element – data collection, has been introduced as a beneficial byproduct of utilizing RPA.

Bots for Data Enrichment, Interface Enhancement

Data FeedsData Collection is a key enhancement that is often overlooked when utilizing RPA.  More often than not, RPA is used simply to automate a manual process.  But, it also offers a unique opportunity to start capturing and storing critical data as workflows and processes are completed.  This data can then be enriched and provided to advisers for analysis.  It can also be used to improve custom reporting for advisers, as a foundation for business intelligence, or as a window into workflows and statuses.

At Ultimus, we’ve invested in RPA technology by partnering with an industry leading RPA firm and using their RPA system to program our bots.  These bots are the main drivers behind our automation strategy and serve as the foundation for our uSUITE product, which consists of multiple integrated, internally built applications administrating portions of our core business functions.

Service Provider Bot Benefits

However, unlike other service provider firms that have typically introduced RPA as an end user tool, Ultimus has embedded it within its application development team.  This allows greater enhancements of the RPA’s capabilities by layering custom code and interfaces on top of it. Building tailored applications on top of the RPA delivers customized functionality, enhanced security, enriched data collection, interactive user interfaces, and exception based alerts to name a few.

Data StructureThis combination of RPA and custom application development establishes an elite platform for various portions of our core business.  Processes are run as data is received, whether that be at 10AM or 10PM, eliminating all wait times and bottlenecks.  Increased transparency is established through user interfaces, allowing supervisors to see fund processing statuses while allowing staff to simultaneously analyze all results.

Bot Benefits for Advisers

Benefits for AdvisersAs service provider users spend less time on manual data entry, more time can be spent on performing analysis for investment adviser clients. Bots collect critical data for business insights. Therefore, RPA allows quicker access to enriched data, and an opportunity to work with advisers on data analysis and business intelligence. RPA also reduces risk considerably and offers increased transparency.  Finally, RPA allows quicker reaction to requests, and provides an improved level of customization – including enhanced customized reports.  All of these benefits result in improved service levels for fund clients.

These new technologies have driven critical workflows and processes such as shareholder transactions, corporate actions and price reconciliations, Net Asset Value review and distribution, customized reporting and much more for Ultimus and ultimately provides clear benefits for clients.  Robots have entered our business and improved how we operate, in turn allowing us to provide much greater customization and enhanced services for our investment adviser clients. Is your fund administration service provider staying ahead of the technology curve with robots? And passing along valuable benefits?

About the Author: