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Guest Contributor: Good Tech Decisions Will Inspire Investor Loyalty

By: Lani Oneil, Vice President at Envision Financial Systems

By: Lani Oneil, Vice President at Envision Financial Systems

Strong returns have put the wind at the backs of many alternatives sponsors, helping their fundraising efforts to thrive. Take non-traded-REITs, for example. For the five years ending Dec. 31, the Stanger NAV REIT Total Return Index returned 64 percent cumulatively. Inflows in 2021 were three times those in 2020, according to Stanger.

Of course, the wind isn’t always at sponsors’ backs. To ensure the long-term viability of their businesses, firms need to match their asset-gathering efforts with strong client service. Client service can be thought of as relationship-building plus strong operations. Strong operations, in turn, rely heavily on technology. Third-party service providers, as well as alternative sponsors themselves, can zero in on technology decisions that support asset retention.

Now is the time, because maybe more than ever, no one knows where 2022 is headed. Demand for income-producing investments and a pressing need for diversification may continue to drive investor interest in non-traded REITS. And now, higher inflation may also spur investor interest. Research shows that REITs can offer inflation protection. That could push retail investors’ average allocation to alternative assets beyond where it currently sits, at approximately 5 percent, as accessibility improves to match strong demand.

Client service in a tight labor market

Considering the exigent digital transformation in financial services, along with the tight labor market, technology is a reliable way for service providers and alternative sponsors to improve efficiency. Investor service and recordkeeping involve many routine processes, nearly all of which can be automated.

Even for the most unique alternative investment types, there are technology solutions that can handle distributions, statements, capital call tracking, just to name a few, and free up your team for more customer friendly activities. Service providers can therefore support growth without necessarily increasing headcount or other overhead expenses. The same goes for sponsors themselves.

Automating processes can also support employee morale. Manual practices are not systematic, they take more time and are prone to human error. When the inevitable human error takes place, manual corrections are even more time consuming and frustrating for sponsors’ teams.

Prioritizing cost savings can also support asset retention

Another area where alternative investment sponsors are demanding more from service providers is providing investors with online access to their information. Consumers in all industries have become accustomed to obtaining just about anything they need via the internet. An easy to use, device-responsive, secure web portal is today’s expectation for a positive customer experience. This will also contribute to sponsors’ time savings, e.g., cost savings, because investors will have a way to independently retrieve their account information and documents.

Decisions about investor recordkeeping systems also connect directly to overall costs to serve both sponsors and investors. When comparing options, it is wise to account for the ongoing costs of system operation net of the long-term value created. Sponsors should consider each system’s modularity (if any), the staff time used (or saved) and any potential for obsolescence. They should consider flexibility with respect to prorated redemptions, built-in capital call logic, escrow processing, holidays and application hosting.

For alternatives sponsors, another key focus for cost savings in recordkeeping is the account onboarding process. It’s one thing to connect with external onboarding platforms via digital images that then require manual entry on the service-provider side. It’s another thing to have a true point-to-point data exchange that creates the account and the purchase in real time.

Finally, sponsors should consider whether a modern infrastructure enables them to move data around and use it productively while still maintaining its integrity. It’s possible to have real-time data at hand that supports faster, well-informed business decisions.

In scenario planning, business managers need to be strategic about their operational future. Having enjoyed the wind at their back for a period, it’s a good time to prioritize asset retention and cost management, both of which go hand in hand with client service and operational oversight. The choice of technology today should be built to evolve with the business, investor preferences, industry dynamics, and all plausible scenarios in the future.

It also doesn’t hurt to finally eliminate some of those all-too-common operational nightmares.

Lani Oneil is a vice president at Envision Financial Systems, which provides shareholder accounting and management software and services to alternatives sponsors and their transfer agents.

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The views and opinions expressed in the preceding article are those of the author and do not necessarily reflect the views of The DI Wire.

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