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What You Need To Know About Using Automated Methods in Brokerage Reconciliation

by

AudreyB

It is almost a given that what works for companies in the past, may not work for those in the present. Times have been changing and the processes and strategies employed by companies are no exception. Companies need to be innovative in terms of their processes especially that the market growth and development is moving at a fast pace; new technologies and strategies must be used to keep up with the demand. In the financial services sector, some asset managers have already turned to outsourcing companies and new technologies in order to maximize the resources they have and for them to focus on their core businesses.

Trading is a key element in the financial services sector, having lots of reconciliation and settlement procedures for transactions and accounts. This is only one of the categories under the sector which needs immediate attention, as the window for such processes are reduced to less than a day’s time and that the volume is continuously soaring. Old-fashioned vs. Modern In the past, asset and fund managers have heavily relied on manual reconciliation, which involves paper work, in conducting their brokerage reconciliation processes. Employing an old-fashioned reconciliation process has posed great opportunity costs and challenges to both asset managers and brokerage firms since such paper works expose these managers to a more tedious workflow, which consists of coordinating with custodian banks and prime brokers, and to higher risks of errors. Discrepancies in confirmation are most likely to happen in the old-fashioned process as these professionals input the data manually. However, this workflow can change, together with having lesser risks and the elimination of those pain points that were raised. Employing the modern way in conducting reconciliation and file-matching indeed offers a better, streamlined workflow for all parties involved, including the brokerage firms and the fund managers. Trade execution data is required to be processed within 24 hours and if not processed at a specific time, there is a risk for the firm to lose its license; thus, time really is an important issue for such kind of service. This modern process, which uses technologies and automation, reduces the time constraint that envelopes the procedures done by financial analysts. Technology: Bringing into the company a higher level of efficiency An automated reconciliation process, which proves to be a more secure process, leads to a greater value of efficiency, especially on the part of capital management companies. What one can do upon using technologies is to gather account activity from two unique sources, preferably one from an internal source and one from an external source. But there still remains a third party who will serve as an arbitrator, in case there are any disputes that needs to be settled. What also helps the managers in measuring the accuracy of the confirmations that they receive is the automated matching of figures. This provides a faster process for them to detect discrepancies in the data entered into the system. Afterwards, the analysts then review the automated reports and confirmation sheets. If there is a case of mismatched files, the analysts can amend the wrongly inputted data as there is a tool being used that is referred to as electronic messaging, which is quite similar as to how an instant messenger works. Amendments are only done after analysts go back and escalate the issue to the trader. It is now evident that the industry has been exploring different methods as to how they can further better their company practices now that the trading volumes have grown quite significantly.

Audrey B is a member of Infinit Outsourcing content writing department, one of the leading outsourcing companies that provides outsourcing services in research, social media, financial services, and finance and accounting with offices in US, UK, and Asia.

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What You Need To Know About Using Automated Methods in Brokerage Reconciliation