What is a fund administration?
The term “fund administration” has a number of different meanings, some of which are specific to the business world and some that are applicable to the finance sector in general. Fund administration means the management and control of funds in order to carry out activities imposed by legislation or contractual obligations. In general terms, it refers to how an organization should manage their own funds according to any financial regulations and tax laws. According to Fintalent’s fund administration consultants, these rules vary from country to country, but most often require accounting for all revenues/expenses related with each transaction as well as maintaining certain regulatory requirements for operations such as treasurer certification.
The term “fund administration” is typically used to describe the management of other organizations’ assets. For example, in relation to mutual funds and exchange-traded funds (ETFs), fund administration is the process of managing assets that have been raised in order to invest on behalf of a group constituencies. Fund administrators are typically independent third-parties, often skilled auditors or investment firms, who specialize in meeting regulatory requirements and ensuring that fund clients receive accurate information relating to their accounts with minimal interference.
In most cases, in order for a fund administrator to be appointed, they must meet certain criteria specified by the Securities Investment Board (SIB). In addition to meeting certain requirements, administrators must be registered with SIB in order to be authorized to perform fund administration services.
Fund administration is one of the key sectors within the finance industry. The manager of a mutual fund or an independent financial advisor (IFA) may work with a variety of fund administrators who support them with their fund accounting, management, and auditing duties. These duties are typically handled by firms such as Deloitte, Praxis Intermediary Solutions and BDO or outsourced to fund administration consultants like those available for hire on Fintalent.
In addition to these roles in relation to investments on behalf of others, fund administration firms may also provide third-party verification for other kinds of financial transactions such as insurance underwriting or service provider agreements.
While the focus of a fund administrator is mainly on the management of assets, the ongoing regulatory and compliance requirements for the sector mean that support for organizational management is also required.
This means that fund administration organizations are typically organized into different bureaus according to their specific roles within such as risk management, accounting, and regulatory compliance. In order to achieve full functionality in each of these areas, some firms may choose to employ staff who specialize in one or more areas within fund administration rather than appoint a dedicated bureau manager.
While there are several different types of fund administration companies and firms, most provide support for one or more other parts or divisions within organizations. It is important to distinguish between fund administration firms, which potentially provide all of their services from the same organization, and fund administrator firms which may have one or more affiliated sub-firms.
Fund administration firms are generally much smaller than their other two categories. The service models that fund administrators offer are largely based on the cost-effective, independent and objective model in order to meet the requirements of investors as well as comply with all international regulations and legislation in relation to financial transactions. Some may provide a broad range of services while others may specialize in a particular area such as auditing, investment management or legal compliance.
Each firm has its own unique specialization but there are some commonalities across them all. Examples of these are giving investors as much information as possible about the status of their investments such as returns, daily statements and accurate balance checking, meeting all regulatory requirements, and making sure that clients are being kept up-to-date on any changes within the sector. Some firms may provide this information in a variety of different ways and formats including through traditional financial statements, special reports or even using the internet to provide news notifications.
In order to stay compliant with all relevant regulation it is important for fund administrators to have a clear understanding of their clients’ needs in relation to their account management requirements. Many firms will offer a variety of different services including portfolio management which allows clients to set up investment portfolios according to individual objectives and risk tolerance. Other services may include wealth management, retirement planning and estate management.
Fund administrators also typically use a standardized model which serves as the basis for how they manage clients’ accounts and investments. In order to give investors a clear understanding of how their investments are managed, many organizations will provide investment reports to clients on a regular basis giving them information such as daily/monthly statements and performance evaluations including capital gains or losses. These reports may also contain explanations of how the firm manages risk in relation to client accounts and each individual investment.
For fund administrators, compliance means ensuring that the company is following all applicable regulations from tax laws to anti-money laundering legislation and more. In order to be able to comply with these regulations it is important for each fund administrator to have a complete understanding of their clients’ needs. For example, some may set up accounts in a way that is completely independent from their clients’ other financial accounts in case it is ever necessary to separate those assets. Others may put into place programs that allow them the flexibility to deal with any kind of asset and still conform with regulatory requirements.
Many fund administrators are required by law to put into place measures that will allow them to deal with any potential money laundering activities which may occur within client accounts. To meet these requirements, many firms have created policies and procedures that allow them to deal with any kind of suspicious activity that is linked to money laundering. For example, they may put in place rules that deal with the types of investments they are allowed to make and establish clear management procedures for both their own staff and any third-party service providers they work with.
To be able to achieve compliance it is important for fund administrators to keep records on all activity within client accounts. For example, if an investor were to transfer funds from one location or country into an account at a fund administrator’s firm, this transaction would be recorded as a capital in order for the administrator to meet its regulatory requirements. In order to keep the integrity of this information it is important for fund administrators to arrange a way for clients to check the status of their investments on a regular basis.
Fund administrators are required by law to keep a record of all client information as well as other relevant information such as email addresses, account balances and signature. For example, if an investor wants to make a withdrawal from their account, there is often a legal requirement that the funds are not withdrawn until they have been verified to be true by the administrator and any third-party service providers they work with. For fund administrators, these requirements mean that some kind of client relationship management system (CRM) system is likely required in order for them to remain compliant with regulations.
