What Is Reconciliation?
Reconciliation is a process that examines two sets of records to verify that figures are accurate and in agreement. Reconciliation of financial records also proves that accounts in the general ledger are uniform, correct, and comprehensive.
Reconciliation serves as greater control and helps Asset Managers across the trade lifecycle and investor lifecycle. Reconciliations can be performed at multiple levels, for numerous areas, can be of various types, and for multiple purposes. Here are some reconciliations which Fundtec provides under reconciliation outsourcing.
· Reconciliation Outsourcing by Functionality:
P&L Reconciliation by Position
P&L Reconciliation by Investor
· Reconciliation Outsourcing by Counterparty:
Reconciliation with Fund Admin.
Reconciliation with Prime Broker
Reconciliation with Custodian.
· Ancillary Services-
3rd Party liaising
Reconciliation outsourcing lets managers focus on what they do best, and Fundtec plays a significant role in helping the managers to achieve their goals. The advantages of outsourcing are well-known, and it is no surprise outsourcing is the top priority for most managers.
Whether you're an asset manager or wealth manager, a hedge fund, or a family office, you can get the advantages.
Reconciliation Outsourcing By Functionality:
Trade Reconciliation- Trade Reconciliation refers to a set of post-trade activities (typically T+0 or T+1) linked to recognizing and resolving trade breaks. A trade break, or collapse, can occur for many reasons: inconsistent prices or amounts, inaccurate accounts listed, misallocated bunches, insufficient funds, etc. The trade-ops team along with support (middle and back office) are accountable for examining all trades accomplished over a certain period of time and compiling a list of errors, breaks or exceptions, to review. They then send that list to the trading execution desk to collect data on the trade breaks to help with analysis and resolution. The front office along with middle & back office team members collude to recognize and fix the "genuine" trade breaks. The trade data is refreshed to fix the breaks, and all systems are updated to indicate these changes.
Position Reconciliation- The purpose of a Positions reconciliation is to check and verify that managers are holding the same number of securities with a counterparty, as per the counterparty's internal system statements. Some funds or entities in the securities market are mandated by statute to do this reconciliation periodically, but nowadays it is quietly becoming a daily best practice from a trading and operational risk outlook. This process involves the matching of position balances between two or more sources, usually a custodian/broker record and an internal system.
P&L Reconciliation by Position- This means reconciling the P&L at an individual position level. This reconciliation helps in identifying the variances at a position level which can be further analyzed in Cost, Quantity, and Market value levels. This reconciliation is usually performed between fund admin books Vs internal books.
P&L Reconciliation by Investors- This means reconciling the P&L at an individual investor level. This reconciliation helps in identifying the variances at an investor level which can be further analyzed in Cost, Quantity, and Market value levels. This reconciliation is usually performed between fund admin books Vs internal books.
Cash Reconciliation- Cash Reconciliations are usually performed between internal books Vs statements/ fund admin books. This is the reconciliation that is done by every organization irrespective of their nature. Daily cash reconciliation minimizes cash balance mistakes and retains accounting records as accurately as possible. While managing the operations on a daily basis, it becomes very difficult for the in-house team to have a grip on cash balances. Fundtec helps the managers to get this streamlined without the involvement of any in-house employees.
Reconciliation outsourcing by Counterparties:
Reconciliation with Prime Broker- Any reconciliation which is performed between the records of the prime broker Vs internal books can be termed as Reconciliation with Prime brokers. Usually, there will be 3 types when it comes to reconciling the data with prime brokers
a) Position Reconciliation,
b) Trade Reconciliation
c) Cash Reconciliation
Reconciliation with Custodian- Any reconciliation which is performed between the records of the custodian Vs internal books can be termed as Reconciliation with Custodian. Usually, there will be 2 types when it comes to reconciling the data with a custodian:
a) Position Reconciliation,
b) Trade Reconciliation
Reconciliation with Fund Admin- Any reconciliation which is performed between the books of fund admin Vs internal books can be termed as Reconciliation with fund admin. There can be various types of reconciliations when it comes to reconciling the data with fund admin, here are some common examples
a) Position Reconciliation
b) Cash Reconciliation
c) P&L Reconciliation by Position
d) P&L Reconciliation by Investors
Exceptions Reporting- A Reconciliation will be nothing but raw data until the breaks/ exceptions is being properly categorized and reported to the clients along with the comments. With a huge experience in doing the reconciliation, the Fundtec team is very efficient in identifying and categorizing the break with the call to action reporting of exceptions.
Break Resolution- At the time of outsourcing the reconciliation process we define the scope of our services in collaboration with the requirement of the client. Break resolution comes to the picture after the exception report is created. Here Fundtec looks at the items that caused the break in the reconciliations and then fixes it to get the desired results.
3rd Party Liaising- This means liaising with the broker, custodian, and fund admin to for identifying the reasons for the break and resolving it. Fundtec plays a very pivotal role in dealing on behalf of clients and getting the breaks resolved.
Why Fundtec for Reconciliation Outsourcing.
As settlement cycles shrivel and trading volumes increase, your middle and back office can soon become overwhelmed with daily reconciliation. This everyday task can be time-consuming and can be prone to errors. Our reconciliation outsourcing service releases your team to focus on more fruitful activities. Our team comprises experts in providing reconciliation services who have the experience to determine and fix exceptions promptly and keep your operations working smoothly. Following are some factors that should be considered for outsourcing reconciliation services to Fundtec:
24/5 Availability- Our "follow the sun" model ensures that Asset Managers, irrespective of time zone, will get reconciliation services when they need them.
Solid Documentation- When someone is expected to perform a task, the most beneficial thing to do is create process documentation. That is what we do in our reconciliation outsourcing services. Our SOPs are updated regularly, and our team delivers reconciliation with certainty and confidence. Resources may come and go, they get migrated to different roles within the organization, or they're out sick or on vacation, whatever the case may be, when another team member steps in, you need good documentation with training in place to ensure continuity.
Customized Offerings: One shoe size doesn't fit all, so Fundtec customizes and tailors its Reconciliation outsourcing solutions to fit the unique needs of every client.
Industry Expertise: Fundtec's team comprises professionals coming with a wealth of experience from investment banks, fund admin firms, and technology giants. For Reconciliation Services, we have expertise in handling all types of asset classes (from listed securities to OTC products), and reports from different fund admins, brokers, and custodians.
Scalability: Fundtec empowers clients with better scalability via plug and play model which is always customized to the client's needs.
Cost-Effective: Fundtec's expertise, innovation, experience, and result-oriented approach on operational aspects enable us to drive greater process efficiency, and we pass the benefits and savings to our clients.
Transition and Change Management experts: With years of experience in handling transitions, we always consider all stakeholders for changes and transitions. Our client-centric approach enables a smoother reconciliation transition for all types of clients.
ISO Certified: We at Fundtec understand that every piece of information is crucial for our clients, so we follow the highest standards for maintaining quality and data security. Fundtec is ISO:27001 and ISO:9001 certified for providing Reconciliation Outsourcing.