Monthly Archives: September 2014

Category: Innovation, Technology

Gigabyte Internet coming to Boston Financial


When I got my first connection to the internet it was via a 5600 baud modem. It was slow; about 700,000 bytes per second. I remember upgrading to a 9600 baud and then to a 56K modem, which I thought was blazing fast at 56,000 kilobytes per second. Today, many years after that first modem, as my three young sons surf You Tube and play Minecraft at the same time while my wife streams some new TV show, I struggle with the 30 megabytes per second connection at my house. I need more bandwidth or less connected devices. Since the trend is headed towards more connected devices, more bandwidth seems to be the logical solution.

Fortunately, I live in Kansas City and we are one of the first cities to get a Google Gigabyte Fiber network. This new network will bring internet connection speeds close to the gigabyte per second realm; actual speeds are in excess of 700 megabytes per second. This kind of connection will easily support my internet-hungry family. Now, if I could just get connected.

With the huge infrastructure that comes with a gigabyte fiber network, Google is rolling out connectivity slowly across the metro area. They started with a neighborhood in Kansas City, and have been expanding ever since. As cities and towns sign on, neighbors commit to the service; once enough neighbors signup, Google starts installing. Only 157 more for my neighborhood.

18 days


neighborhood chart

Of course, Google Fiber is not all about residential connections. In fact, the introduction of high speed service in Kansas City has sparked a Start-up Village. A group of like-minded entrepreneurs moved their places of business to a small neighborhood close to the Google Fiber hub here in Kansas City. Not only do they benefit from the super-fast internet connection, they are able to take advantage of their close proximity for collaboration.

Google’s gigabyte fiber network means high speed internet for Kansas City residents and businesses. Boston Financial’s Kansas City office will be connected once Google reaches this side of the state line. With the growth of connected devices and businesses as Google expands their network and as more businesses will benefit from the huge bandwidth, our small Midwestern town will be known for something other than great barbeque.

Category: Conferences and Events, Financial Intermediary Administration

We Can’t Stop Talking About Intermediary Oversight


Conference Speaker - 158997907Although it’s been over 10 years since the late trading and market timing scandals rocked the mutual fund industry, intermediary oversight remains an area of focus for fund companies, their boards, and regulators. The industry move to omnibus brought efficiencies to the broker/dealers while taking transparency from funds, thereby casting a spotlight on the need for funds to have a formal oversight program.

Intermediary oversight discussions were prevalent at the 2014 NICSA General Membership Meeting in Boston on September 11 and 12. Several sessions addressed different aspects of oversight providing multiple points of view, but a few common themes emerged.

First, everyone expects oversight programs will evolve with the changing landscape, business needs, and potential regulations. For those reasons, Tim O’Sullivan, a Director in Deloitte & Touche’s Finance and Operation Risk Transformation practice, stresses the importance of sustainability and having the right controls, tools, and systems in place to manage an oversight program. Funds should structure contracts so that policies and procedures can be tested and perform periodic tests of those processes, ensuring they remain relevant in today’s environment.

Audit reports such as the SSAE16 or the Financial Intermediary Controls and Compliance Attestation (FICCA) are key components of an oversight program, but it is important for funds to know what to look for and when to ask questions.

Funds often rely on informational files from intermediaries such as financial activity and account positions to perform oversight activities including invoice validation. Lisa Klassen, Principal, Mutual Fund Operations with Edward Jones,  cautions that given the number of accounts held in omnibus positions, the files are becoming difficult to manage. They take hours to produce on the weekends, and then funds struggle to consume the data upon receipt. Klassen called for the industry to work together to find efficient solutions that work for all stakeholders.

Finally, leveraging relationships is critical. While it may take in excess of 60 days to complete the overall due diligence review of a single intermediary, leveraging existing relationships helps the process move along. Working with intermediary oversight myself, one thing I’ve observed is people’s desire to talk with one another, build and strengthen relationships, and share best practices. Let’s continue the conversations. What are you doing about intermediary oversight?

Category: Client Forum, Innovation

Innovation Leaders: Think Different


global-innovation----485877973How differently? A lot according to Rob Shelton, Global Innovation Strategy Lead at PwC. Based on a global survey of over 1700 C-suite interviews in 23 countries, innovation leaders are almost twice as optimistic about future revenue growth as their “average” counterparts; are much more inclined to use innovation strategies as a “North Star” for design and execution of business goals; understand how to weave an intrapreneurial spirit into the broader corporate culture; and use collaboration as the centerpiece of the company’s core competency.  Rob shared these and other PwC innovation survey highlights at Boston Financial’s recent Client Forum held in San Francisco.

The reality is that unlike other industries such as technology, health sciences, pharmaceuticals, and energy, financial services have not been overly dependent upon innovation as a life line for growth. Particularly in the fund industry, asset growth until recently has largely been a function of a growing secular demand for asset investments. Baby Boomers, for example, have contributed significantly to a growing asset base as has the expanding global capital marketplace. This is not to say that  innovation has been absent from the equation (witness for example alternative investment strategies and ETFs), but in our opinion innovation has not played the central role in financial services that it has in other industries. The Social Economy: Unlocking Value and Productivity Through Technology, a recent report from the McKinsey Global Institute, lends support to this point of view: In general, the financial services industry lags behind other sectors in adoption of social technologies. …. Only 64% of financial services firms reported using at least one social technology tool, compared with 86% in high technology.

We believe this is changing and that in the future, product and service innovation will play a critical role in who succeeds in the financial services industry. This indeed will require   “thinking differently” in terms of redesigning service models to meet the individual needs of a more diverse investor base; or designing more cost-effective e-services and social technologies; or providing greater leadership and operational support in meeting a more demanding regulatory and compliance environment; or utilizing data analytics and social technologies to enable more efficient and effective shareholder servicing.

These are the kinds of questions that are driving our focus on “thinking differently” at Boston Financial. In a prior blog post, Creating an Innovation Capable Organization, we spelled out some of the key elements we believe to be critical in building this capability. Things like core processing, alignment of resources and goals, and client collaboration. We are making good progress on each of these items as part of our Product Development Group. Today we are expanding that initiative to include a broader perspective on what key mega-trends will likely impact our business over the next 3-5 years.  These trends include a growing millennial investor base and the need to develop delivery models that utilize social technology tools and devices.

No one, of course, can predict with accuracy the future. But what we can and are doing at Boston Financial is not only to begin to think differently but to build a readiness for succeeding in that future environment. In the coming months ahead you will be hearing more about this initiative. In the interim we encourage your response to this blog to register your own views on how we might best shape this effort in meeting your own views and needs for the future.

Category: Client Forum, Financial Intermediary Administration

Intermediary Oversight: Dominant Topic at the Client Forum and Beyond


room-setup-resizedSince I was competing against beautiful Northern California weather and the vibrant city of San Francisco, I thought I might be alone during the Intermediary Oversight best practice session at the Client Forum. However, intermediary oversight continues to be a dominant theme across the industry and I was pleasantly surprised to have almost 40 industry colleagues join me to discuss this topic.

Although I was the session facilitator, our clients kept the conversation going and posed a number of questions for each other.

Here are some session highlights:

  • We’re nearing the end. The majority of omnibus conversions are almost  done. The large ones are completed and the focus is on some regional firms.
  • Oversight programs are evolving.  Our clients are continuing to develop and enhance their programs with a key focus on onsite visits, questionnaires, oversight teams, and risk rankings.
  • FICCA is part of the solution but not the only aspect needed of an oversight program. Although clients are seeing an increase with FICCA, adoption is slow and not all top firms will complete it. Some challenges include:
    •  There is not an industry-wide list of all the firms that have completed a FICCA so you don’t know which firms to contact for a copy
    • Once you identify who has  completed a FICCA, you then need to  identify key contacts to request it
    • There are several areas of a FICCA that are missing so there is a need to evaluate which areas need additional review
    • Some firms that provide FICCA will not allow an onsite visit. However, clients do not agree with this approach, as they view FICCA as just one tool in the toolbox.
  • Clients are looking to improved data management with a focus on oversight. Some firms are looking to data mining versus onsite meetings or other historical forms of oversight. Data sources include: review of industry and federal websites (sanctions, issues, etc.) and request reports from intermediaries
  •  Sometimes intermediaries aren’t responsive. Clients shared some ideas on how they address:
    • Conference calls
    • Follow up questionnaires based on areas that were missing on FICCA
    • Some have pursued withholding TA payments or suspended trading

This remains a very hot topic in the industry. In fact, it was also a prevalent topic throughout the NICSA General Membership Meeting. Barbara Browne will be talking about the intermediary oversight themes discussed there in the next blog post. Funds are focused on eliminating gaps in their programs and looking for industry best practices to best manage and oversee their intermediary relationships.  Overall, the session was extremely interactive and I found it insightful into the current areas of focus related to intermediary oversight. I suspect we will be hosting one of these sessions at next year’s client forum in Chicago.

Category: Conferences and Events

And The Award Goes To…


Joan's AwardWell it wasn’t the Academy Awards with sealed envelopes and Oscars, but no less meaningful for the winners of the NICSA/NOVA Awards.  Last Thursday, during the luncheon session at the NICSA General Membership meeting in Boston, award recipients were recognized for their contributions to our industry in front of a room full of their peers and colleagues.

Among them was our former Chief Compliance Officer, Joan Dowd, who received the 2014 NICSA Lifetime Achievement Award.  It is given “to an individual who has distinguished himself or herself during a successful career in the mutual funds industry, and also by his or her significant contribution to the success of NICSA.”  Robert Tritt, Executive Vice President from DST, one of our parent companies, received the 2014 Robert L. Gould Award for Outstanding Service to the Fund Industry.  DST also received an honorable mention for Innovation in Back Office Efficiencies.  Congratulations to Joan, Bob, and all of the other award winners!

Listening to what all of those people had accomplished, and looking around at everyone else, I realized that a great deal of experience and commitment to our industry was represented in that room.  However, we can’t overlook the need to prepare for our next generation of leadership.  The luncheon keynote speaker, Wes Trochlil from Effective Database Management, addressed this in his talk “The Impact of Younger Staff on Technology.”

Wes focused on the Millennials (those born between 1980 and 2000), who will make up the majority of our workforce by 2025. These folks were born into technology, grew up on the web, and communicate differently than those who preceded them.  For them:

  • Google has answers for everything
  • Amazon is the standard against which they evaluate other interactions
  • Technology has always been mobile
  • They want automation and self-service
  • As with the Minecraft game, they expect to be able to tailor their experiences
  • They are asked their opinions on everything, from music to purchases, and want to provide them
  • They are collaborative and want to know what is going on, what is behind decisions

So what does this mean to us as employers?

  • Involve Millennials, especially in technology decisions
  • Focus on training and communication, remembering that they digest information in bite-sized chunks
  • Be transparent about policies and decisions

These are our next generation of leaders – let’s welcome them!