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Background

The fund manager historically relied on manual reconciliation processes for the company’s client money and client assets as well as fund of funds (FOFs) cash and stock positions. However, this caused a number of challenges to the team of six who were responsible for reconciliations.

 

Keith Clarke, Reconciliations Analyst at Octopus, describes the impact: “Client funds have to be correctly accounted for on a daily basis, which makes reconciling transactions between our portfolio system, our bank and our broker a vital financial activity. We previously used spreadsheets to match data from multiple sources which was often received in different formats such as csv files, printed statements or other paper based records. Each of our investment products and FOFs have to be reconciled separately, with the FOFs in up to three currencies. Identifying exceptions was similarly time-consuming. However, the daily reconciliation had to take priority over any other activity regardless of how much it might demand of my time every day.” Keith Clarke, Reconciliations Analyst - Octopus Investments

 

Octopus evaluated a number of reconciliation systems, as Keith continues: “We talked to large software companies as well as some smaller suppliers, including Aurum Solutions. One of the advantages of Aurum’s software is that the advanced reconciliation functionality was a fraction of the cost of other high-end systems. We also saw that the inherent flexibility meant that it could be tailored to our specific requirements.”

They have a friendly, knowledgeable team that genuinely understands the financial services industry and always helps us to respond to business change which in turn helps us to continually improve our back-office processes. I would happily recommend Aurum’s solution to other companies as a flexible, cost effective reconciliation system that can be tailored to individual requirements that is supported by a dynamic vendor with a commitment to customer service.
Keith Clarke, Reconciliations Analyst - Octopus Investments

Complex daily reconciliations

On a daily basis, Octopus uses the platform to reconcile up to 10,000 or more cash transactions related to client money, matching customer information such as cash advances or stock balances from its portfolio system ‘Exact’ with bank statements from HSBC. The software produces an exception report which is used to resolve any unmatched items.

 

Octopus also performs cash reconciliations against its broker State Street. The platform matches its cash transactions against Exact and then custody cash transactions are matched to Exact. Items in Exact will only be reconciled once they have been matched to both State Street sources thus providing more robust cash positions for the fund manager.

 

This new system has helped Keith and his team to manage a complex process more effectively and efficiently. “It allowed us to move from a manual, two-way cash reconciliation with our broker to an automated three-way reconciliation which allows our fund managers to know precisely how much cash they have available for trading. We could never have done this before due to restraints on time and resourcing, and the complexity involved.”

 

Octopus uses Aurum’s front-office accounting tool to assist with forecasting to check that future trades have taken place. For example, the platform accrues management fees on a daily basis so the fund manager knows what the management fee payment will be over a defined period of time.

Aurum Solutions helped us visualise how their software could work specifically for us. They understood from the outset what we wanted to achieve for our cash and stock reconciliations and then delivered a working solution. To their credit, we found that Aurum Solutions pride itself on catering to the operational requirements of its customers and this proved an invaluable quality.
Keith Clarke, Reconciliations Analyst - Octopus Investments

Ongoing roll out of Aurum’s Solution

After our first deployment, we subsequently expanded the scope of Aurum’s platform to include Client Asset reconciliations and Stock reconciliations. These have both been successfully deployed.

 

Octopus is looking to achieve still more, with its plans for client asset reconciliations. Keith explains how the vision for managing Octopus’s reconciliations will be realised within Aurum’s platform: “The client asset reconciliations will involve matching client shareholdings irrespective of which custodian such as Crest or Computershare for example, holds the share. In effect, it is a reconciliation within a reconciliation and we are working with the Aurum Solutions team on how this will be implemented.”

 

Aurum’s platform has been called into action by Octopus as a data cleansing tool. Customer data such as contact details and client contracts are held on Exact and its CRM system, Novus. Keith adds, “It is used to match key data in each system to ensure that we have the correct customer information across both systems. This is a value-added extra that we get, thus leveraging our investment in a single data matching and reconciliation system.”

We are achieving significant benefits from the deployment of a customisable […] rather than an off-the-shelf reconciliation product. This is testament to the Aurum Solutions philosophy of tailoring the software to how a customer runs its business. Whenever we have requested modifications [..] as our business evolves, Aurum Solutions has always risen to the challenge.
Keith Clarke, Reconciliations Analyst - Octopus Investments

Benefits

Keith turns to the problematic area of risk: “Management of risk is another area where Aurum have made a positive impact. For example, we use a number of reports that enable easy identification of critical outstanding items. Additionally, we use a daily client money report which calculates on an aggregate basis the total client money held by Octopus across all products. This is used by different departments, including Compliance, and ensures that Octopus is meeting its capital adequacy requirements. Replacing manually produced reports means we are able to mitigate risk by identifying exceptions and resolving queries faster.

 

“Aurum’s reporting capabilities are widely used for meeting our audit requirements. Reports such as the summary reports showing us our cash advance position and breaks form the basis of the information that we supply to our auditors.”

 

Keith has been impressed with Aurum Solutions as a supplier too: “The service that we receive from Aurum Solutions is unique in my experience. They are very hands-on and employ a collaborative approach that has been very successful. One of the core values at Octopus is to be ‘better and better’ and Aurum Solutions certainly share this philosophy.”

We have seen a quick return on our investment […]. A major benefit is the time saved. Even though we have increased the number of bank accounts and transactions that we process, we can complete all the daily reconciliations before 12pm most days. Without […] this process would easily take at least one person an entire day to complete.
Peter Orsi, Head of Operations - Octopus Investments

About Octopus Investments

Founded in 2000, Octopus Investments (‘Octopus’) is a fast-growing UK fund management business with leading positions in several specialist sectors including healthcare, energy and smaller company investing. Octopus Investments offers financial products which aim to solve problems faced by real people.

 

The company prides itself on innovation, expertise and delivering exceptional customer service. It was just one of fourteen investment providers to be awarded a five star rating in the Financial Adviser Service Awards in 2014. The company has achieved significant growth since it was founded and is set for further expansion over the coming years. Despite over £5bn assets under management, 50,000 investors and 450 employees, Octopus remains a UK-focused company with a local presence.

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