In a recent blog in this series, we previously discussed the importance of an effective response to planned and unplanned events for banks and insurers. Planning for disruptive events is also important for asset management operations, where an occasional mistake or event has a widespread financial impact on investors. In particular, there are some challenges and complexities that are specific to remediation.
No two remediation events are identical, but all carry the same challenges like legal and tax ramifications. Many firms think their internal resources are able to handle complex remediation, often failing to fully appreciate how disruptive to everyday operations the response will be. While some firms may be accustomed to responding to critical, time-sensitive events, they likely lack the specialized expertise required for remediation. As such, self-executed remediation increases risk by redirecting focus from a firm’s customers and core business.
The best remediation response is one that’s planned ahead of time. Assemble the project team of key internal stakeholders, likely including people from tax, finance, legal, compliance, and investor and advisor relationship managers. An external support team should include outside legal counsel, a financial forensics expert, a tax advisor and a distribution specialist. Self-administered remediation faces tougher scrutiny from regulators, so utilizing outside experts adds a level of enhanced credibility and will create a smoother process overall. Bringing in expert external resources also ensures that the right questions are asked and answered, the methodology is compliant, customers receive timely and accurate communications, and deadlines are met.
By having a remediation plan and team already in place, the execution phase can begin immediately when it is required. From analyzing and reconciling investor data to final payment calculations, tax withholding and reporting, and customer care, a well-developed plan will help a firm address any surge in customer inquiries with timely responses and accurate answers. With a partner that has resources and systems already in place to execute the event, a flexible staffing model to meet volume spikes and multiple communication channels to service clients, the execution phase of remediation will go smoothly.
Many firms neglect to incorporate external remediation expertise into their plan because they don’t realize they need one until they need it. This is a problem because regulations can set strict, tight deadlines for remediation, allowing little time to train staff, acquire tools and partner with external resources. Having a partnership already in place allows your firm to respond at a moment’s notice. By responding quickly to remediation, and by communicating quickly and accurately with clients, a firm can make sure remediation is simply a blip instead of a reputation-damaging event. Protecting client relationships while maintaining compliance and transparency ultimately improves retention.
To learn more about what asset managers should do to plan for remediation and what to look for in a partner, download our “Prepare for the Unexpected: A Guide to Remediation and Investor Distributions for Asset Managers” whitepaper.
Written by Carol McGrath-Pestilli
Senior Director, SS&C Flex