Periodic Reporting for period 3 - Fundsphere Terms (Disruptive Regulatory Technology for Asset Management Industry. FinTech company changes the global Asset Industry forever)
Reporting period: 2018-07-01 to 2019-03-31
The financial crisis brought to light shortcomings in the financial industry’s transparency, leading to a push to improve standardization and traceability in the Asset Management Industry. Implementing common standards and definitions across the EU is necessary to simplify the way information is managed for legal agreements, commission calculation and tracking. The bulk of the regulatory actions taken in order to avoid conflict of interests between asset managers (product providers) and fund distributors (sellers) is embedded in regulations MiFID II and RDR, supported by the Dematerialised Mutual Fund Sales Agreements (DMFSA, now called Open Terms) initiative proposed by market players (including Metrosoft) for more transparency and better consumer protection.
One of the processes that urgently needs improving is the creation, modification, search and compare of terms of business for sales agreements (contracts between buyers and sellers) which are notoriously resource-consuming (typically 200+ pages long, 3-6 months of lawyer work) but essential to the fund processing and distribution chain. Processing large volumes of assets has become a challenge due to the extensive documentation that lawyers must create, negotiate and review for every agreement. Lawyers are paid to work every line of documents with hundreds of pages, leading a standard agreement to take up to 3 months to produce, a non-standard one up to 6 months and some global ones even a year or more. For big asset management houses with hundreds of distributors this creates a major headache in time and resources spent creating and updating hundreds of agreements.
Fundsphere Terms solution solves the current risky and opaque business process and provides savings by offering an innovative searchable, data-driven solution to create digital terms of business and auto-flow information for downstream Straight-Through Processing (STP). Fundsphere Terms disrupts current Contract Lifecycle Process using Extensible Markup Language (XML) to create a completely native digital process from scratch with structured dialogue for complete, correct data capture, automated output and direct data storage.
The overall objectives of the project focus in the first place on piloting the industrial demonstration of the product with first adopters – a large Asset Manager and a leading Distribution Platform. This means updating the functional features of the product to create a fully operational platform verified by a real customer.
The other important objective is to replicate the solution for the market by scaling-up the system and offering it as software-as-a-service (SaaS) from the Cloud for small clients and from a Luxembourg-based hosting facility for Luxembourg-based clients.
The ultimate goal of the project is to commercialize the solution to increase Metrosoft’s revenues. The steps towards this goal require to attract prospects by communicating about the project and the proposed solution.
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One of the processes that urgently needs improving is the creation, modification, search and compare of terms of business for sales agreements (contracts between buyers and sellers) which are notoriously resource-consuming (typically 200+ pages long, 3-6 months of lawyer work) but essential to the fund processing and distribution chain. Processing large volumes of assets has become a challenge due to the extensive documentation that lawyers must create, negotiate and review for every agreement. Lawyers are paid to work every line of documents with hundreds of pages, leading a standard agreement to take up to 3 months to produce, a non-standard one up to 6 months and some global ones even a year or more. For big asset management houses with hundreds of distributors this creates a major headache in time and resources spent creating and updating hundreds of agreements.
Fundsphere Terms solution solves the current risky and opaque business process and provides savings by offering an innovative searchable, data-driven solution to create digital terms of business and auto-flow information for downstream Straight-Through Processing (STP). Fundsphere Terms disrupts current Contract Lifecycle Process using Extensible Markup Language (XML) to create a completely native digital process from scratch with structured dialogue for complete, correct data capture, automated output and direct data storage.
The overall objectives of the project focus in the first place on piloting the industrial demonstration of the product with first adopters – a large Asset Manager and a leading Distribution Platform. This means updating the functional features of the product to create a fully operational platform verified by a real customer.
The other important objective is to replicate the solution for the market by scaling-up the system and offering it as software-as-a-service (SaaS) from the Cloud for small clients and from a Luxembourg-based hosting facility for Luxembourg-based clients.
The ultimate goal of the project is to commercialize the solution to increase Metrosoft’s revenues. The steps towards this goal require to attract prospects by communicating about the project and the proposed solution.
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The first two Work Packages (WP) focused on extending business and technical functionalities of the product. The most significant achievement was review and extensions of the standardized format for storing terms of business of the sales agreements (Open Terms). We also completed functionalities required by the market such as search and print tools for the product, security features, versioning terms and the workflow functionality. The mechanism of pre-defined and configurable templates for entering terms of business was built. In line with project assumptions, we created a separate publicly available service for reading and visualizing terms of business stored in XML standard. And finally, the interaction with the real market players allowed us to improve the software significantly. The feedback received from clients and prospects enriched the existing functionalities and triggered development of new value-added features.
We completed the adjustments of the application to finally install it and expose to the external world in the Amazon Cloud. We also completed the tasks related to electronic signature of terms of business, with accordance with EU’s eIDAS regulation, under WP2.
In parallel, we completed the WP3, where we designed, procured and installed the environment and Fundsphere Terms product in the hosting facility in Luxembourg. This allowed to achieve an important milestone, which is the ability to offer the software in a software-as-a-service model.
In January 2018, it occurred to us that our pilot client and other prospects are so distracted by Brexit and a number of impacting them EU regulations (MiFID II, GDPR, PRIIPs) that they delay significantly the cooperation with Metrosoft on Fundsphere Terms.
Having little interaction with the market to validate the software, we asked European Commission (EC) to extend the timelines of the project by 6 months during which we would focus on sales efforts and dissemination of the information. Thanks to the positive reaction from the EC, a lot was achieved in the WP4 and WP5 dedicated for communicating about the project and for commercializing the solution. We attended 30 industry events disseminating the information and seeking for prospects, conducted many demos for potential clients, organized dedicated workshops for industry influencers from Luxembourg, mostly ALFI members and speakers on conferences. We closed the deal with Funds Europe and Asset Servicing Times, the well-known industry magazines to conduct the promotion of Fundsphere Terms and our company. A series of interviews with Metrosoft appeared in the magazine. In recognition of our effort to disrupt the industry, the independent jury of the Funds Europe Awards 2017, granted us with a special commendation in the category “European Innovator of the Year”.
All actions above brought a result of signing a licensing contract for portions of Fundsphere Terms with one of our existing clients. We also signed a letter of intent with a European fund distribution platform, MFEX. The pilot project with MFEX gives the exposition to 840 asset managers they are servicing. These achievements allowed us to get back on track and start developing extensions in line with market needs.
All the above efforts allowed us to approach closely the ultimate goal of the project: we convinced three industry players to use Fundsphere Terms: an asset manager, a distribution platform, and a service provider. We are engaged in a process of implementation at four other clients.
We completed the adjustments of the application to finally install it and expose to the external world in the Amazon Cloud. We also completed the tasks related to electronic signature of terms of business, with accordance with EU’s eIDAS regulation, under WP2.
In parallel, we completed the WP3, where we designed, procured and installed the environment and Fundsphere Terms product in the hosting facility in Luxembourg. This allowed to achieve an important milestone, which is the ability to offer the software in a software-as-a-service model.
In January 2018, it occurred to us that our pilot client and other prospects are so distracted by Brexit and a number of impacting them EU regulations (MiFID II, GDPR, PRIIPs) that they delay significantly the cooperation with Metrosoft on Fundsphere Terms.
Having little interaction with the market to validate the software, we asked European Commission (EC) to extend the timelines of the project by 6 months during which we would focus on sales efforts and dissemination of the information. Thanks to the positive reaction from the EC, a lot was achieved in the WP4 and WP5 dedicated for communicating about the project and for commercializing the solution. We attended 30 industry events disseminating the information and seeking for prospects, conducted many demos for potential clients, organized dedicated workshops for industry influencers from Luxembourg, mostly ALFI members and speakers on conferences. We closed the deal with Funds Europe and Asset Servicing Times, the well-known industry magazines to conduct the promotion of Fundsphere Terms and our company. A series of interviews with Metrosoft appeared in the magazine. In recognition of our effort to disrupt the industry, the independent jury of the Funds Europe Awards 2017, granted us with a special commendation in the category “European Innovator of the Year”.
All actions above brought a result of signing a licensing contract for portions of Fundsphere Terms with one of our existing clients. We also signed a letter of intent with a European fund distribution platform, MFEX. The pilot project with MFEX gives the exposition to 840 asset managers they are servicing. These achievements allowed us to get back on track and start developing extensions in line with market needs.
All the above efforts allowed us to approach closely the ultimate goal of the project: we convinced three industry players to use Fundsphere Terms: an asset manager, a distribution platform, and a service provider. We are engaged in a process of implementation at four other clients.
Fundsphere Terms offers unique value for all departments of asset managing companies: Legal, Sales, Operations, Compliance, Risk, as well as Distribution Platforms. When implemented in these companies Fundsphere Terms will provide benefits to all parties in Asset Management industry: distributors, intermediary networks (financial advisors), banks, fund supermarkets, transfer or centralizing agents and custodians as well as institutional and individual investors. The product will assure Investor protection, ability to distribute products much quicker, will allow meeting expected professional standards and compliance with transparency requirements. It will lower operational risk and will provide savings in operational costs by eliminating typical calculation and payment errors leading to deteriorating trust and monetary losses.