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The Joys of Retrocession Payment Reconciliation

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A look into how we address the pain points of a multi-channel, multi-product, multi-rate set, type of distributor channel for the EAM market.

We were approached by a bank several months ago to remove a thorn in its side concerning downstream payments to the distribution channel – the External Asset Manager ‘EAM’. To keep this simple, downstream payments are retrocessions or fees shared with the distribution channel for the sale of products and transaction costs.

That Works… Well, Kind Of
The bank was currently using a legacy system, that for all intents and purposes, “worked.” But, “worked” also meant people within the Finance team needed to review and message the file before sharing with the Relationship Manager. If there were any discrepancies, then the Finance person would need to review, recalculate, and so on. This process taxes the bank and Finance team, multiple people, and many staff-days of work – every month/quarter.

The legacy system wasn’t flexible and not designed for this type of multi-channel, multi-product, multi-rate set, kind of distributor that is the EAM market.

The pain funnel doesn’t stop once the Relationship Manager shares the file with the EAM. The operations person/people at the EAM then need to review and reconcile the file with what they expected to receive in terms of retrocessions AKA revenue. Any discrepancies, and there will almost always be, are sent back through the funnel to the Finance team.

So Here’s What We Did
We parachuted our Advisory team in for discovery and a two-week engagement to confirm pain points for the entire process – front to back. The output from the engagement became the framework for a software solution that was highly adaptable and low touch integration.

The good folks at the Finance team within the bank now have software that:

  • Significantly reduces time to reconcile retrocessions per cycle
  • Eliminates rework due to incompleteness of data and timing of data feeds
  • Provides transparency to the distribution channel as the EAM will also leverage the same transaction data feed

All parties involved in the retrocession lifecycle workflow benefitted from this development and deployment.

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