IOOF is consolidating the custody and fund accounting for its managed funds and multi-manager business, covering more than $20 billion, and will reduce the number of custodians from three to one after a review which began late last year.
As part of the review, the manager is also having a new system built with the Milestone group, with which it has had a long-term relationship using ‘pControl’ unit pricing.
Vincent Rossitto, IOOF’s head of investment and accounting services, said that the rationalisation would follow a number of mergers and acquisitions for the group which had meant that IOOF had relationships with three custodians: NAB Asset Servicing, JP Morgan and BNP Paribas.
“This makes it difficult with things like their different exceptions in different systems and different people to talk to,” he said. In October last year, IOOF decided to take a step back and do a review of all aspects of its back and middle-office operations.
“We thought we needed to consolidate. We also decided to look at our operating models and our core competencies. We asked ourselves what we should be doing and what we should outsource.”
Rossitto, who has been at IOOF for about 30 years – since its days as a friendly society – led the review, which rated each of the existing custodians for service, initially, and then later in the process according to their rate cards.
“We thought about going to tender,” he said, “but they can be long drawn-out processes. We wanted to consolidate as quickly as possible. And we also didn’t think that a tender would achieve very much that we didn’t already know.”
The end result is a new relationship with BNP Paribas covering custody and master custody, some middle-office functions and some compliance.
IOOF retains its retail registry, which Rossitto believes is a core competency for the group. A lot of expensive errors in retail accounting processes, for instance, occur with unit pricing, which is a reason IOOF was possibly the first manager in Australia to use the Milestone pControl system more than 10 years ago. pControl has grown considerably in functionality since then and now has several modules, including ‘outsourced CIO’. IOOF will be using other modules, such as cash management and tax and accounting.
* Greg Bright is publisher of Investor Strategy News (Australia)