The Advantages of Straight-Through Processing

Mike Consol, Editor at Real Assets Adviser, asked Bill Robbins, CEO at Altigo and WealthForge, to address the capabilities of straight-through processing platforms like Altigo and the impediments to their adoption. This interview is featured in part in the November issue of Real Assets Adviser. 

What are the overall advantages of straight-through processing (STP)?

Funds and firms are adopting STP platforms to make it easier for their clients to do business with them. For example, the advisor and client experience are significantly improved through an intuitive workflow that replaces manual check and app subscription paperwork. STP processing also enables operational efficiency that reduces costs and cycle times by dramatically reducing or eliminating costly rework resulting from NIGO errors. Additionally, STP technology allows funds and firms to increase their operational control and improve compliance oversight with automated data validation, risk intelligence, and business rules that can be configured to consistently enforce suitability and other compliance controls.

How widely adopted is STP thus far?

STP technology has gained significant traction among advisors and funds. For example, the Altigo platform launched in 2019 has engaged over 200 BD/RIA firms and 800 funds who together have completed $3.6 billion in transactions. Much of the industry adoption to date has come from the technology enthusiast “early adopters” and there remains a significant opportunity for growth and acceleration as more of the mainstream wealth management market adopts STP technology for alternative investments.

Give me a brief scenario of a client adopting STP and the difference it made?

Scenario 1:  A fund manager client adopted Altigo for its STP solution and saw rapid adoption across their distribution partner client base. That manager has reported significant increases in operational efficiency that have allowed them to scale fundraising to over $1 billion without having to make proportional increases in their closing team staff. They also have received compliments from their RIA and BD distribution partners for making it easier to do business with them. Additionally, that manager has seen a significant reduction in not-in-good-order (NIGO) rates which have reduced the average time to close new investments, thereby reducing their bridge financing costs for the fund.

Scenario 2:  An independent broker-dealer client has adopted Altigo as its core STP processing platform for alternative investments. That firm worked closely with our operations and client success team allowing us to configure enterprise integrations including single sign-on, configurable approval workflows, risk intelligence on their alts suitability questionnaire, and data integration with their CRM and books and records systems. After a successful pilot program, that firm has rolled out Altigo to its network of over 200 financial representatives.

What are the chief impediments to wider adoption?

Change is hard. While the advantages to STP automation are clear, it does require wealth managers and asset managers to be intentional about the use of technology to improve their business. One challenge is that there are a number of platforms available in the market, and nobody wants to pick the “wrong” one.  Another is that it requires a fair amount of coordination among each of the participants in the alts ecosystem including funds, firms, custodians, and fund admin/transfer agents.  Not all of these businesses have the same appetite for technology investment at the same time.

Connect the dots between the use of STP and the broader utilization of alternatives and real assets in client portfolios.

There are two primary obstacles holding the industry back from broader utilization of alternatives and real assets in client portfolios:  1) access to high-quality products and 2) alts are too difficult to own. STP technology provides the infrastructure that will solve both of these problems. Much like the automation of the mutual fund industry in the 1980’s that resulted from the introduction of NSCC FundServ, alts broadly will benefit from the broad adoption of STP processing. When we can make owning an alternative investment as easy as a mutual fund, we will continue to see high-quality, institutional asset managers enter the space. That competition will continue raising the bar for alignment with investor outcomes and attract a broader cross-section of wealth managers who are seeking to help their clients achieve financial success.

What else do RIAs and other financial industry players need to know about STP?

STP can help your practice.  Multiple business models are available in the market depending on what problems you want to solve, including access and ease of ownership.

*The experiences of advisors described in this article may vary by firm.

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