Tag: KYD

Benefiting from the network effect

Competition is the lifeblood of business – but not always; sometimes it does not make sense. It can often lead to better outcomes when natural competitors work together for their collective benefit. That applies to the task of conducting distributor due diligence, where sharing the burden of deciding what to ask distributors makes everyone a winner. 

So far in this series on Know Your Distributor, we’ve looked at the time, cost, quality and resource benefits of harmonising distributor due diligence to ensure the right questions are asked – once – of the right people to ensure ongoing compliance. 

Another aspect of the ume platform and process encourages our investment management clients to share their insights and expertise that has nothing to do with the competitive advantage they may enjoy in delivering returns for their investors. 

By sharing their understanding or interpretation of regulatory requirements and 

their experience of compliance, all users of the platform access a common store of knowledge of best practice. 

Collaborative approach 

Our collaborative approach brings fund groups together to reach a consensus on what questions distributors should be asked in order to meet asset managers’ due diligence requirements. The process involves collective decision-making and sharing of insights, allowing every player to improve the quality of their compliance. There is a real sense of working together to do things better. 

In effect, ume clients use crowdsourcing to determine the most effective distributor questionnaire by agreeing on the required due diligence standards and the information that must be obtained from their intermediaries. 

The curation process allows the platform’s users to assemble the most important questions to ask their distributors, providing a more carefully calibrated questionnaire for each distributor, depending on their particular characteristics such as size or cross-border reach. The process is so successful because participants understand the benefits it can deliver both to themselves and other asset managers. 

Industry consensus 

When industry peers agree on the approach to take and quality threshold 

expectations, distributors know they must respond fully and with thought, because they are the product of an industry consensus. Answering precise questions just once is easier, quicker and leads to richer responses when distributors know they need to complete a single questionnaire in an online format that they can easily follow, rather than a succession of queries from each asset manager’s own, different list of questions. 

The network approach facilitates follow-up activity. Investment managers can query answers that don’t seem quite right, whether an authorisation issue or details of money laundering and financing of terrorism controls. The follow-up responses are also shared immediately across the network. Often distributors will respond by reviewing and improving their own processes or structures, reducing the distribution risk for asset managers further and enhancing client protection against mis-selling – as well as shielding fund firms from the risk of reputational damage. 

Our collaborative approach is a robust and tangible example of competitors working together for their common benefit. If you’d like to know how this network effect can help your own business, that of your distributors – and of your peers as well – we’d like to talk to you. 

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Digitising fund distribution due diligence – where collaborative compliance meets risk management

The third in our series of articles on making KYD – Know Your Distributor – work for you, your partners, clients, your brand and regulator looks at compliance automation: how to turn the due diligence questionnaire into a powerful tool. 


As we have discussed previously, when investment managers agree to standardise questionnaires, it’s useful for all stakeholders. Distributors have to complete only a single questionnaire, making it more likely they will supply and update their data more quickly. Investment managers get continuous and more comprehensive insight into their distributor base. 


Structuring and standardising questionnaire answers has another benefit. Instead of wading through spreadsheets, Word documents and pdfs, ume platform users have access to structured and consistent data. That enables them to apply risk-based algorithms to automate scoring and to identify outliers quickly and easily. 


The number of distributors covered, and the volume of data received enable investment managers to identify patterns. A UK independent financial advisor may answer questions differently from a Swiss private bank or a German insurance company, but it will typically have a similar profile to its peers. That makes it easier to compare different types of distributor channels in other regions, and to identify outliers and abnormal profiles more quickly and where further investigation is required. 


That ability is vital since reputational and regulatory risks can escalate from a poorly managed distribution network. 


Typically, the ume process enables you to identify 80% of any distribution base as low risk, where distributor profiles conform to expectations and do not require further action. But what about the others? You can now focus on the 20% or so that represent a possible risk. Reducing the human workload for the distribution network as a whole frees managers to focus on what matters and deliver better results from their compliance efforts. 


ume’s automated risk scoring helps our investment manager clients to quickly and proactively identify issues, facilitate further investigation and, if need be, take remedial action. Compliance teams undertaking more in-depth analysis can focus on their added value, spotting issues before they turn into a major problem. That should make your board, shareholders and, especially, regulators happy. 


If you’d like to know more about how our powerful system can ease your regulatory burden through automation, we would love to tell you. 

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Mutualising fund due diligence efficiencies: the benefits of sharing

Asking a question clearly, with a single voice, will elicit a clearer answer

Everyone has too much work to do. If you’re in fund compliance, do you spend more time on due diligence questionnaires for your largest bank distributors, or on tens or even hundreds of smaller distributors where your relationship may be more sporadic? If you’re a distributor with not enough hours in the day, do you respond to the biggest global investment managers first and hope the smaller ones don’t hassle you for missing their impossible deadlines? 

At ume, we have spent a lot of time looking at how we can reduce the expense and effort spent by asset management companies attempting to update their understanding of each distributor. We’ve also looked at how to reduce the typical delay in obtaining distributor responses from anything up to nine months almost to real time. 

The answer seems simple, as the growing list of asset manager clients for the ume platform demonstrates. If distributor questionnaires are harmonised using a single platform, distributors will find them easier to complete and return. Creating this efficiency to the advantage of everyone involved is good for both asset manager and distributor – and especially for heads of compliance. 

Everyone benefits if the fund industry as a whole asks a single set of questions, particularly as asset managers tend to use the same distributors. Eliminating mechanical repetition is a big incentive for distributors to update their information more regularly and completely. 

A simpler process can eliminate the problem of outstanding questionnaires. Standardisation also negates unintended bias as all distributors can be compared on the same basis through ume’s automated risk evaluation tool. Distributors can therefore be assessed on a continuous basis and compared in a consistent way. 

Deploying ume’s automated due diligence questionnaire process is a win-win for everyone. Distributors update when they need to, when an investment manager asks follow-up questions that prompts a revision to their answers, or from a regular prompt at least every 12 months. 

Because the distributors are required to complete only a single questionnaire, customised for their organisational requirements, investment managers will get higher quality and more timely data, since updated information is available to every investment manager the distributor works with. 

We eliminate the volume of questionnaires that distributors are required to handle, from possible hundreds to one, and reduce the likelihood of the smallest niche fund firms finding their responses are the distributor’s lowest priority. 

Mutualisation of efficiencies is not about gaining a competitive advantage, but about everyone doing an essential task well. The ume platform represents a new business model, connecting not just organisations, but people, resources and knowledge, creating value and making it easy to exchange. 

It’s scalable, eliminates friction and creates beneficial feedback loops for our clients in the investment community and improves the quality of data. Our ‘collaborate to compete’ approach has made us the largest fund distributor due diligence ecosystem. Saving time and cost on compliance while ensuring better quality enables our investment manager clients and their distributors to focus on their central roles in the asset management industry. 

If you’d like to know how to obtain more time to spend on the important stuff, please get in touch. 


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Collaborate to know your fund distributors better, and less painfully

Collaborate to know your fund distributors better, and less painfully

Distributor due diligence is, frankly, a thankless task for investment managers who send questionnaires out and the distributors who are asked to complete them. But due diligence is a regulatory requirement before both sides enter a relationship, and on a regular ongoing basis. Standardising questionnaires and their transmission between investment managers and distributors is efficient for everyone involved. Initial questionnaires are simpler to complete and return and updates can be more frequent, leading to better compliance with the law.

Typically, we find investment managers send out distributor questionnaires infrequently to distributors they assume are low risk. But everyone uses a different format, whether Word, Excel or PDF, and has a different set of questions. Distributors receive them by e-mail, review, circulate and return them. That’s the theory, at least. In practice many go unanswered because of the burden of what is often a highly inefficient process placed on all parties.

Asset management firms in Europe may work with anything from five to 1,500 distributors, from one-man-band independent advisers to the largest banks and online platforms. The due diligence process can require significant resources and it is no surprise that questionnaires get lost in the system or that answers are often of low quality.

At ume, we agree with you: the whole process could be much better. Cost-effective and efficient regulatory compliance processes can be a competitive advantage. A reduced need for human time and effort is good for the bottom line, and ongoing compliance reduces the risk of reputational damage and regulatory penalties. And a quicker distributor due diligence process can also speed marketing efforts and the flow of assets into your funds.

We’ve also built a digital platform to handle the questionnaires, doing away with bottlenecks like e-mail and incompatible formats. This turns a highly laborious task for distributors into a smooth continuous updating process. On both sides, the workload is reduced and maintaining due diligence compliance becomes an easier ongoing process. And because data is standardised, it is easier to compare one distributor with another.

The algorithms underlying the platform also continuously re-evaluate the data whenever any distributor updates their information and automatically adjusts the risk assessment that fund groups receive.

Better quality, more regular information makes it easier to ascertain on an ongoing basis whether a distributor is fit and proper, and the right choice for an asset manager. The process also substantially reduces the resources required and ensures more responsive compliance than the ad hoc approach of the past, as well as ensuring much greater transparency. At company level, boards and management committees can exercise their control obligations much more effectively.

If you would like to know your distributors better we’re ready to talk to you.

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