For companies working in the Private Capital Markets of Canada – it can often feel like our technology is stuck in the Stone Age. While time-saving, client friendly features like: digital signatures, pre-populated documents and paperless transactions are the norm in other industries, the vast majority of exempt market participants continue to bury their clients in paperwork like it’s 1995.
This lack of tech adoption creates staggering inefficiencies resulting in the waste of capital and thousands of work hours. While this is bad news for most – if you are a job seeker looking for a manual data entry position your prospects in the Private Capital Markets have never been hotter.
In his book, “The One Thing” author Gary Keller, encourages the reader to stop thinking in terms of giant to do lists, which he argues leave the user jumping from menial task to menial task without netting any real results. Instead, he encourages the reader to focus daily on choosing and completing ONE THING at a time before any other work is done. While this may sound simple, the difficulty comes from choosing the right ONE THING to complete on a consistent basis.
So how do you choose the right ONE THING? Well, you start by asking a question: What’s the ONE THING that by its completion will yield the greatest result? By Identifying and completing that ONE THING day after day – you create incredible progress.
This got me thinking – what’s the one thing that if accomplished would yield the greatest result for the Private Capital Markets from a technology perspective? For me the answer is clear – the exempt market needs a “data hub”. A data hub would allow for the secure and seamless exchange of information between multiple parties. While this may not sound as sexy as say digital signatures (which will become standard for most of our industry very soon) the impact is far greater.
To gain a better understanding of what a data hub can do for the Private Capital Markets let’s look at two scenarios to see just how inefficient the process is now and how much more efficient it can become.
SCENARIO 1
A new client purchases an exempt market product.
The current inefficient way: An advisor enters the transaction and client details into their system. Once approved, the information is sent to the issuer (usually via email). The issuer then manually enters all of the same information into their own system. All communication and updates are done over the phone or through email. This process is inefficient because paper transactions have a very high NIGO (Not in Good Order) rate and communication via email makes it easy for things to fall through the cracks.
The efficient data hub way: An advisor enters the transaction and client details into their system. Once approved, the transaction along with all of the required forms are transferred from the EMDs system to the Issuers system with the click of a button.
“This lack of tech adoption creates staggering inefficiencies resulting in the waste of capital and thousands of work hours. While this is bad news for most – if you are a job seeker looking for a manual data entry position your prospects in the Private Capital Markets have never been hotter.”
The Issuer receives notification of the pending transaction and can easily review the pertinent client information and documents. Once the Issuer approves the transaction, a new client is automatically created in the Issuers system thus removing the need for the same client /transaction record to be entered in twice.
Think about this for a second – how many hours are spent by an issuer manually keying in sub docs and new clients? A data hub eliminates this inefficiency, freeing up the Issuers time. Accurate transactions, auto notifications and real-time status updates mean a faster, smoother, more efficient investing experience for everyone with less time spent on administration.
SCENARIO 2
An EMD requires quarterly distribution information and unit values from their Issuers to generate client statements as per CRM2 reporting obligations.
The current inefficient way: The EMD requests the information from all 24 of its Issuers. Over the course of a few weeks, the issuers respond with spreadsheets and emails all of which are formatted differently requiring the EMD to first sort through and then manually update their clients records accordingly.
The efficient data hub way: The EMD requests the information from all 24 of its Issuers directly through the data hub. With just a few clicks, the Issuers can send the EMD all of their client records with the updated distribution amounts and current market value. The EMD reviews the updated client information to ensure it is correct and once approved, their client’s holdings are automatically updated in their system. The EMD is now ready to create CRM2 statements with no manual data entry, calculating or sorting needed.
These are just two of the many benefits that industry adoption of a data hub will have for everyone involved in the Private Capital Markets of Canada.
The best part? None of this data hub talk is pie in the sky thinking. We at Exempt Edge, a division of the Olympia Financial Group, have already completed phase 1 of the data hub. Exempt Market Dealers and Issuers will be able to securely connect to each other and exchange client transaction information and distributions through the “EdgeLink” Data Hub by the time you are reading this – saving a ton of resources which can be better spent elsewhere.
The technology in the Private Capital Markets is long overdue for a major update and it’s finally about to get one.
Welcome to the Private Capital Markets 2.0…
Stephen Preston, Vice President
Exempt Edge Inc.
