Author: ume

Benefiting from the network effect

Competition is the lifeblood of business – but not always; sometimes it does not make sense. It can often lead to better outcomes when natural competitors work together for their collective benefit. That applies to the task of conducting distributor due diligence, where sharing the burden of deciding what to ask distributors makes everyone a winner. 

So far in this series on Know Your Distributor, we’ve looked at the time, cost, quality and resource benefits of harmonising distributor due diligence to ensure the right questions are asked – once – of the right people to ensure ongoing compliance. 

Another aspect of the ume platform and process encourages our investment management clients to share their insights and expertise that has nothing to do with the competitive advantage they may enjoy in delivering returns for their investors. 

By sharing their understanding or interpretation of regulatory requirements and 

their experience of compliance, all users of the platform access a common store of knowledge of best practice. 

Collaborative approach 

Our collaborative approach brings fund groups together to reach a consensus on what questions distributors should be asked in order to meet asset managers’ due diligence requirements. The process involves collective decision-making and sharing of insights, allowing every player to improve the quality of their compliance. There is a real sense of working together to do things better. 

In effect, ume clients use crowdsourcing to determine the most effective distributor questionnaire by agreeing on the required due diligence standards and the information that must be obtained from their intermediaries. 

The curation process allows the platform’s users to assemble the most important questions to ask their distributors, providing a more carefully calibrated questionnaire for each distributor, depending on their particular characteristics such as size or cross-border reach. The process is so successful because participants understand the benefits it can deliver both to themselves and other asset managers. 

Industry consensus 

When industry peers agree on the approach to take and quality threshold 

expectations, distributors know they must respond fully and with thought, because they are the product of an industry consensus. Answering precise questions just once is easier, quicker and leads to richer responses when distributors know they need to complete a single questionnaire in an online format that they can easily follow, rather than a succession of queries from each asset manager’s own, different list of questions. 

The network approach facilitates follow-up activity. Investment managers can query answers that don’t seem quite right, whether an authorisation issue or details of money laundering and financing of terrorism controls. The follow-up responses are also shared immediately across the network. Often distributors will respond by reviewing and improving their own processes or structures, reducing the distribution risk for asset managers further and enhancing client protection against mis-selling – as well as shielding fund firms from the risk of reputational damage. 

Our collaborative approach is a robust and tangible example of competitors working together for their common benefit. If you’d like to know how this network effect can help your own business, that of your distributors – and of your peers as well – we’d like to talk to you. 

Read More

Digitising fund distribution due diligence – where collaborative compliance meets risk management

The third in our series of articles on making KYD – Know Your Distributor – work for you, your partners, clients, your brand and regulator looks at compliance automation: how to turn the due diligence questionnaire into a powerful tool. 

 

As we have discussed previously, when investment managers agree to standardise questionnaires, it’s useful for all stakeholders. Distributors have to complete only a single questionnaire, making it more likely they will supply and update their data more quickly. Investment managers get continuous and more comprehensive insight into their distributor base. 

 

Structuring and standardising questionnaire answers has another benefit. Instead of wading through spreadsheets, Word documents and pdfs, ume platform users have access to structured and consistent data. That enables them to apply risk-based algorithms to automate scoring and to identify outliers quickly and easily. 

 

The number of distributors covered, and the volume of data received enable investment managers to identify patterns. A UK independent financial advisor may answer questions differently from a Swiss private bank or a German insurance company, but it will typically have a similar profile to its peers. That makes it easier to compare different types of distributor channels in other regions, and to identify outliers and abnormal profiles more quickly and where further investigation is required. 

 

That ability is vital since reputational and regulatory risks can escalate from a poorly managed distribution network. 

 

Typically, the ume process enables you to identify 80% of any distribution base as low risk, where distributor profiles conform to expectations and do not require further action. But what about the others? You can now focus on the 20% or so that represent a possible risk. Reducing the human workload for the distribution network as a whole frees managers to focus on what matters and deliver better results from their compliance efforts. 

 

ume’s automated risk scoring helps our investment manager clients to quickly and proactively identify issues, facilitate further investigation and, if need be, take remedial action. Compliance teams undertaking more in-depth analysis can focus on their added value, spotting issues before they turn into a major problem. That should make your board, shareholders and, especially, regulators happy. 

 

If you’d like to know more about how our powerful system can ease your regulatory burden through automation, we would love to tell you. 

Read More

Mutualising fund due diligence efficiencies: the benefits of sharing

Asking a question clearly, with a single voice, will elicit a clearer answer

Everyone has too much work to do. If you’re in fund compliance, do you spend more time on due diligence questionnaires for your largest bank distributors, or on tens or even hundreds of smaller distributors where your relationship may be more sporadic? If you’re a distributor with not enough hours in the day, do you respond to the biggest global investment managers first and hope the smaller ones don’t hassle you for missing their impossible deadlines? 

At ume, we have spent a lot of time looking at how we can reduce the expense and effort spent by asset management companies attempting to update their understanding of each distributor. We’ve also looked at how to reduce the typical delay in obtaining distributor responses from anything up to nine months almost to real time. 

The answer seems simple, as the growing list of asset manager clients for the ume platform demonstrates. If distributor questionnaires are harmonised using a single platform, distributors will find them easier to complete and return. Creating this efficiency to the advantage of everyone involved is good for both asset manager and distributor – and especially for heads of compliance. 

Everyone benefits if the fund industry as a whole asks a single set of questions, particularly as asset managers tend to use the same distributors. Eliminating mechanical repetition is a big incentive for distributors to update their information more regularly and completely. 

A simpler process can eliminate the problem of outstanding questionnaires. Standardisation also negates unintended bias as all distributors can be compared on the same basis through ume’s automated risk evaluation tool. Distributors can therefore be assessed on a continuous basis and compared in a consistent way. 

Deploying ume’s automated due diligence questionnaire process is a win-win for everyone. Distributors update when they need to, when an investment manager asks follow-up questions that prompts a revision to their answers, or from a regular prompt at least every 12 months. 

Because the distributors are required to complete only a single questionnaire, customised for their organisational requirements, investment managers will get higher quality and more timely data, since updated information is available to every investment manager the distributor works with. 

We eliminate the volume of questionnaires that distributors are required to handle, from possible hundreds to one, and reduce the likelihood of the smallest niche fund firms finding their responses are the distributor’s lowest priority. 

Mutualisation of efficiencies is not about gaining a competitive advantage, but about everyone doing an essential task well. The ume platform represents a new business model, connecting not just organisations, but people, resources and knowledge, creating value and making it easy to exchange. 

It’s scalable, eliminates friction and creates beneficial feedback loops for our clients in the investment community and improves the quality of data. Our ‘collaborate to compete’ approach has made us the largest fund distributor due diligence ecosystem. Saving time and cost on compliance while ensuring better quality enables our investment manager clients and their distributors to focus on their central roles in the asset management industry. 

If you’d like to know how to obtain more time to spend on the important stuff, please get in touch. 

 

Read More

Collaborate to know your fund distributors better, and less painfully

Collaborate to know your fund distributors better, and less painfully


Distributor due diligence is, frankly, a thankless task for investment managers who send questionnaires out and the distributors who are asked to complete them. But due diligence is a regulatory requirement before both sides enter a relationship, and on a regular ongoing basis. Standardising questionnaires and their transmission between investment managers and distributors is efficient for everyone involved. Initial questionnaires are simpler to complete and return and updates can be more frequent, leading to better compliance with the law.

Typically, we find investment managers send out distributor questionnaires infrequently to distributors they assume are low risk. But everyone uses a different format, whether Word, Excel or PDF, and has a different set of questions. Distributors receive them by e-mail, review, circulate and return them. That’s the theory, at least. In practice many go unanswered because of the burden of what is often a highly inefficient process placed on all parties.

Asset management firms in Europe may work with anything from five to 1,500 distributors, from one-man-band independent advisers to the largest banks and online platforms. The due diligence process can require significant resources and it is no surprise that questionnaires get lost in the system or that answers are often of low quality.

At ume, we agree with you: the whole process could be much better. Cost-effective and efficient regulatory compliance processes can be a competitive advantage. A reduced need for human time and effort is good for the bottom line, and ongoing compliance reduces the risk of reputational damage and regulatory penalties. And a quicker distributor due diligence process can also speed marketing efforts and the flow of assets into your funds.

We’ve also built a digital platform to handle the questionnaires, doing away with bottlenecks like e-mail and incompatible formats. This turns a highly laborious task for distributors into a smooth continuous updating process. On both sides, the workload is reduced and maintaining due diligence compliance becomes an easier ongoing process. And because data is standardised, it is easier to compare one distributor with another.

The algorithms underlying the platform also continuously re-evaluate the data whenever any distributor updates their information and automatically adjusts the risk assessment that fund groups receive.

Better quality, more regular information makes it easier to ascertain on an ongoing basis whether a distributor is fit and proper, and the right choice for an asset manager. The process also substantially reduces the resources required and ensures more responsive compliance than the ad hoc approach of the past, as well as ensuring much greater transparency. At company level, boards and management committees can exercise their control obligations much more effectively.

If you would like to know your distributors better we’re ready to talk to you.

Read More

KPMG ranked ume as one of the top 36 Regtech in Europe

The Regtech sector is evolving rapidly and KPMG expects significant development in the next 24 months.

In a recent survey published in December 2019, KPMG France analysed 250 Regtechs in Europe which have been classified in 6 main categories according to their business model. KPMG then compared their respective competitive advantages and selected the 36 most promising Regtechs. ume is very pleased to have been chosen as one of the top 36 Regtechs in Europe.

The survey can be found here

Read More

The Communitarian revolution

Chief executive Laurent Denayer, whose regtech firm UME supplies the asset management industry with automated due diligence on fund distributors, talks to Bob Currie about mutualising information for collective advantage.

Management companies are required to conduct periodic due diligence on how distributors are marketing their funds. The second Markets in Financial Instruments Directive (MiFID II), for example, imposes EU-wide product governance requirements and obligations regarding the manufacture and distribution of products and services to end clients.

Under the Target market component of this regime, a management company must implement a product approval process that defines an identified target market of end clients for each financial instrument. It must be able to demonstrate that its distribution strategy is consistent with that target market and that all risks relevant to distributing to this target segment are assessed on an ongoing basis. More generally, management companies have an oversight obligation on the delegation of their distribution activity.

Questions and answers
Typically, this process involves sending out questionnaires, gathering in the responses, evaluating results, making follow-up calls to clarify gaps and then generating the associated reporting. The average time committed by management companies and global distributors may be 15-20 hours per fund distributor per annum. When aggregated across a management company’s full distribution network, this represents a large time commitment and cost.

This is also a burden from a distributor’s standpoint. The distributor may receive hundreds of due diligence questionnaires from management companies over the year, each monitoring similar risks but using slightly different questions and formats.

No consistent standardisation applies across this data-gathering exercise, meaning that distributors must spend time customising the same block of information to meet each management company’s specific requirements.

To streamline this process, regtech firm UME (pronounced ‘you-me’) proposes standardisation of information collection through the use of a single questionnaire. The management company can define a risk-based approach to its due diligence process, for example conducting evaluation of its “highest-risk” distributors annually and reviewing its low and medium-risk distribution agents less regularly.

Ume estimates that there are six layers of intermediation between a management company and the end investor, which can make it difficult to build a transparent, accurate view of their distribution network.

Although the information collection process becomes standardised, the management company can attach different weighting to different questions within the questionnaire, depending on its risk priorities.

By collating distributor information on a centralised platform, this has enabled ume to assemble a comprehensive global distributor database. “If an Asian fund manager wishes to distribute into a new European market, for example, or a Luxembourg-domiciled management company plans to extend sales into a new emerging market, we have a database of eligible distributors in our database that may fit their requirements,” says chief executive Laurent Denayer. These can be filtered according to a number of selection criteria.

Communitarian spirit
The principle in regtech, says Denayer, is that you should collaborate to compete. By mutualising information that provides little competitive advantage, it enables users to progress more rapidly, both as groups and as individual companies.

It has taken time for some management companies to adjust to this communitarian principle. But there may be a significant reduction in administrative overheads for those who are willing. “In October, we onboarded a new asset management client that was working to build its network to 60 distributors worldwide,” says Denayer. “The team lead was spending four days per week on this process, building contacts with new distributors and conducting periodic due diligence on those already in their network.

“On appointing our solution, they have now reduced this commitment to approximately four hours per week, enabling the company to reallocate this headcount and cost to value-creating functions”.

To create this facility, ume was established in 2017 with Laurent Denayer as chief executive officer and Oleksiy Shostak as chief technology officer. The platform was established between May and September 2017 and a prototype was ready to roll out to early adopters in October 2017. The company, which has its headquarters at the Luxembourg House of Financial Technology (see page 6), signed its first full client in January 2018. It now has information on its platform covering more than 1,500 distributors in over 55 jurisdictions.

©2019 funds europe – February 2019

https://bit.ly/2UgCUGo

Read More

ume won the 2018 award for best RegTech Innovation of the year in Luxembourg

On November 15th, the Luxembourg Finance Innovation Summit celebrated its 10th anniversary with more than 250 professionals. During the event, the Luxembourg Finance Awards were distributed, recognizing the best practices and solutions available in Luxembourg.

After having won in 2017 the award for Finance Start-up of the year, ume won the 2018 award for RegTech Innovation of the year. The story continues!

 

 

 

 

 

 

 

 

 

http://www.infinance.lu/actualites/luxembourg-finance-awards-2018-and-winners-are

Read More

RegTech 100 for 2019 recognized ume as one of the world’s most innovative solution

The RegTech 100 for 2019 is announced to recognize the pioneering companies transforming compliance, risk management and cybersecurity

The world’s most innovative technology solution providers that address the challenges of dealing with regulatory issues within financial services, were announced today by RegTech Analyst, a specialist research firm.

The RegTech (regulatory technology) industry has seen huge growth in the last two years as banks and financial institutions grapple with the unrelenting pace of regulatory change across all jurisdictions. Over $4bn has been invested in RegTech companies since the beginning of 2016.

As a result, this year’s process to identify the leading 100 companies in the RegTech space was even more competitive than last year. A panel of analysts and industry experts voted from a longlist of 824 companies produced by RegTech Analyst, compared to a list of 416 last year. The finalists were recognized for their innovative use of technology to solve a significant industry problem, or to generate cost savings or efficiency improvements across the compliance function.

Fifty-five new companies entered the RegTech 100 this year. The risk management category saw the biggest increase with an additional 10 companies gaining RegTech 100 status to occupy 47 places on the list, while companies offering solutions that address MiFID II regulation in Europe saw a 10% increase in their number to take a total of 38 places.

European and North American companies still dominate the RegTech 100 with 60% and 29% of places, respectively. Within Europe, UK companies enhanced the country’s leading position on the list with 30 representatives compared to 26 last year. The emergence of a thriving global RegTech ecosystem has seen companies from another 21 countries make the list, including Ireland, Switzerland, Singapore, India and Luxembourg.

“The impact of the most innovative RegTech companies will be measured in billions of dollars over the next few years,”according to Mariyan Dimitrov, head of research at RegTech Analyst. “RegTech 100 companies offer solutions that enhance processes across the entire compliance function, including onboarding verification, risk management, communications monitoring, information security and reporting by using the latest technologies such as artificial intelligence, blockchain, natural language processing and biometrics.” 

A full list of the RegTech 100 is available at www.RegTech100.com. More detailed information on all companies as well as in-depth industry analysis is available in the Global RegTech Review (www.GlobalRegTechReview.com).

Read More

ume in the top 50 start-ups ‘made in Luxembourg’ to follow in 2019

Paperjam magazine puts at the heart of its edition of November 2018, 50 start-ups “made in Luxembourg” to follow in 2019. Fintech, regtech, application, artificial intelligence, software, virtual reality and others …

The editorial staff decided to call on a panel of 11 personalities with complementary expertise – investors, entrepreneurs, incubators, public bodies – to help them make their choice. If the definition of a start-up is debated, Paperjam retains these criteria: a company having a maximum of five years, proposing an innovative solution that does not exist on a large scale in the market, and which has development ambitions international.

ume is very pleased to have been selected by this jury!

http://paperjam.lu/news/ume-le-tripadvisor-de-lindustrie-des-fonds

Read More

ume selected for Salesforce Accelerate FinServ

Salesforce Accelerate is thrilled to kick-off its program in Europe and blaze a new trail with an inspiring shortlist of companies innovating in the FinTech and InsurTech spaces. The program will kick off with its first workshop, taking place at central London’s Salesforce Tower on September 3rd.

Salesforce Accelerate is a four-month virtual program designed to provide the insights and support that companies need to strategically align with Salesforce and accelerate their time-to-market with AppExchange. Previously known as the Salesforce Incubator, this program has already successfully graduated more than 40 companies. The program will also include three in-person workshops, taking place in London, Dublin, and Paris over the coming months.

 

Over 87% of Salesforce customers use AppExchange solutions to extend their success with their customers. A strong partner ecosystem is the number one differentiator in today’s digital world and that’s why we couldn’t be happier to welcome these 14 companies into the program. Let’s win big together.

– Anne DelSanto, EVP and GM Platform, Salesforce

Financial Services was one of the first industries to experience the impact of the new generation of clients demanding personalized, high-value and easy to use services. It is also a highly regulated space, which means both established and new players need to share the fundamental values of trust and transparency. ume is very proud to have been selected for this challenging programme amongst 13 other innovative companies pioneering new uses of technology and disruption in Financial Services, all driven by a focus on customer experience.

 

We are dedicated to helping our financial services customers delight their customers by letting them focus on the experience rather than the product. And, as the industry continues to be disrupted, that’s never been more important for our customers. These fourteen companies are examples of the amazing fintech and insurtech solutions being developed across Europe and Israel, reinforcing this region’s position as an innovation hub.

– Joaquin de Valenzuela, Head of Financial Services EMEA, Salesforce

Read More