Trust companies and trust professionals need to invest in modern IT systems in order to reduce costs, increase efficiency, mitigate risk and simply remain competitive. That is the message from International Private Banking Systems, the specialist provider of wealth management software for the private banking sector, following an assessment of the market carried out in the run up to this year’s STEP Caribbean conference.
IPBS observed that many trust companies are still using manual record-keeping and accounting systems, or relying on legacy technology that is no longer efficient and often expensive to maintain.
Bruce Raine, founder and president of IPBS said: ’Our review of this market shows that the trust industry really needs to catch up with the standards set by the rest of the wealth management industry by using modern, up-to-date technology solutions. The latest private banking and wealth management systems can deliver integrated functionality to meet all of the financial record keeping of a trust company from double-entry, multi-currency general ledger accounting to forecasting income streams and management of the collection process. The trustee’s mandate is not simply to record external events, e.g. a dividend collection, but to know that that event should happen and to take appropriate action if it does not.’
Mr Raine pointed out that the use of Excel and paper-based record keeping for basic reporting such as preparing financial statements, fee management and administration means that key information ’resides in multiple information silos’, often only existing in hard copy. This manual record keeping and accounting, he said, was expensive and made it difficult to produce effective reports, while facilities for audit and compliance purposes were limited.
’For example,’ he continued, ’the production of year-end reports requires the analysis and inspection of many months of manual records, which is a laborious process that is time consuming and prone to risk of error. The trustee will ultimately be held accountable for any mistakes or omissions that take place, however long ago they may have happened.’
Without effective automation, Mr Raine warned, the manual effort required to maintain records, access data and manage regulatory disbursements of various fees and licences could be enormous. In turn, this impacted on the trustee’s ability to carry out essential financial inventory and could make it difficult to establish an accurate or timely financial position, which could ultimately result in conflict between trustees and beneficiaries.
Trust companies therefore needed to look at investing in automated systems to address these issues. An additional factor that would drive demand for new automated systems was the requirement to meet the latest anti-money-laundering (AML) and know-your-customer (KYC) legislation, which in many instances extends beyond the relationship with the settlor to each of the beneficiaries. Without effective technology, many trustees might have difficulty in answering basic questions from beneficiaries about the trust assets and the income derived from them.
Mr Raine concluded: ’Whilst organisations are under pressure to reduce costs, it is important that this is done without impacting on the performance of the core business. Therefore I strongly encourage trust companies to invest in appropriate technology which will leave them well positioned when the worldwide market recovery occurs. It will also ensure that business expansion can be accommodated using existing systems without the need to increase staffing overheads.’