Not All LISPs Are Created Equal. Some Are Just More Equal Than Others
Being in the middle of an identity crisis is never fun, except when it is. Over the past two years, each time someone has asked me what I do, I have changed my answer. One day I am a ‘product developer for a financial services company’, the next I am ‘in marketing’. Other days I feel more like ‘a technologist’ and still others ‘part of a team that runs an investment platform’. Yet, I have never been more engaged nor had more fun at work than where I am right now.
The truth is: I work at a ‘LISP’ as part of the product and marketing team where we have been hard at work developing the retail investment platform of the future. Basically, we’re changing the way investments are done.
What is a LISP?
In South Africa, a retail investment platform has traditionally been called a “LISP”, standing for Linked Investment Service Provider which is the legislated definition. Our industry body, the Association for Savings and Investments South Africa (ASISA), defines a LISP very simply as a “company that enables you to invest in a wide range of collective investment schemes, such as unit trusts funds (“funds”), via one source”. ASISA highlights centralised administration (including collecting client money, executing trades and reconciliation), producing regular statements, providing a single point of contact, and sending out annual capital gains tax certificates as being key jobs done by LISPs.
As the nascent industry evolved to meet a market need, the forerunners made tactical decisions to develop their LISPs using whatever technology was at hand at the time. Consequently, most large LISPs in South Africa have been built using outdated technology, usually a banking or insurance ‘backend’ system from the early 2000s that has been retrofitted to serve investment administration needs. Although these decisions were made out of necessity, the result today is a sub-optimal foundation that uses frameworks and processes that are not designed to perform the tasks or solve the problems experienced by wealth managers and their clients now, nor in the future.
Everything can be improved, and LISPs that want to remain relevant in the future should consider the following:
- Too often, platform users are restricted to certain trading days in the month thereby delaying execution of instructions and requiring corrections to trades
- Overly manual reconciliation processes expose clients to unnecessary risk of units going missing
- Overly complex operational environments require manual intervention in high volume, routine processes exposing clients to unnecessary risk
- Client correspondence documents need a long overdue ‘refresh’ to help clients better understand their investments and make better-informed decisions