Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
What blockchain means for super funds and platforms
Trevor Dixon
Distributed ledger technologies – usually beneath the headline-grabbing Bitcoin and blockchain examples – are going to present a major disruption to the operations of wealth management platforms and big super funds. So far, the big banks have made all the running. The others need to catch up.
According to Trevor Dixon, a working group member of the Australian Digital Business Council and former general counsel of BPAY, once people recognise that most financial assets today exist purely as digital records, the possibility for distributed ledgers to transform the financial system becomes much clearer.
Distributed ledgers, such as blockchain and its most famous adopter Bitcoin, are digital records of who-owns-what. But, unlike traditional database technology, there is no central administrator of the ledger, nor is there a central data store. Instead, the ledger is replicated among many different nodes in a peer-to-peer network, and a consensus algorithm ensures that each node’s copy of the ledger is identical to every other node’s copy.
The set of copies is referred to as a ‘single shared ledger’ and because asset owners must use a cryptographic signature to debit their account and credit another’s, the ledger is supposedly unforgeable.
The big banks have been early supporters of research, ploughing many millions of dollars into their own programs and also investing heavily in rival startups. This interest has started to permeate through to their wealth management arms, Dixon says, so super funds and non-bank platform operators need to put more effort into the technological developments too, he warns.
In a recent report for a superannuation industry client, Dixon says: “As the traditional financial ecosystems are modernising through use of improved interoperable standards and transaction speeds, advances in distributed ledgers will increasingly be applied to the underlying assets – and not just transfers of value.
“These distributed ledger technologies can be used alongside the modernised financial system infrastructure – or could indeed supplant parts of it.”
For wealth management platforms the advances in this distributed technology can, and will, be harnessed in many ways, including:
- Improved identity management and security
- Reduced operational costs
- Dynamic reconciliation and transaction recording
- Ability to record and transfer “smart” or “conditional” contracts
- Trading in bespoke digital assets.
Whether or not the start began with the blockchain, the fund management industry’s platforms will be weaned off their centralised double-entry book-ledgers and it is likely to happen more quickly than people think.
Dixon is chairing a keynote session on the implications of new payments technologies at the My Platform Rules conference on the Gold Coast, February 21-23. His panelists are: Saxon Bartrop, Distributed Ledger Technology Lead, KPMG; Richard Miller, Director Payments Advisory, Deloitte; and Leigh Mahoney, Head of Payments Portfolio, ANZ.
View conference program details here
