“Very insightful!  Great discussion.”

“Overall a great experience.”

“Any opportunity with peers to discuss processes, achievements, pain points, etc., is extremely valuable.”

Only positive sentiments followed our first ever NQR Intermediary INSIGHT Client Conference earlier this year.  The event featured a keynote address from the Investment Company Institute (ICI), a client panel, roundtable discussions, and a presentation from Mid Atlantic Capital Group.

Mid Atlantic’s perspective on omnibus relationships garnered particular interest from our fund clients, especially since the intermediary is an early adopter of the FICCA audit report.  Presenter Michele A. Coletti, Mid Atlantic’s Executive Vice President of Trust Product Management, shared her experiences with FICCA—from the original rationale and benefits to its effects on collaboration with fund partners.

FICCA Rationale and Benefits

Coletti and Mid Atlantic’s preliminary interest stemmed from a surge in FICCA language and expectations as revised fund agreements rolled in, particularly in money market reform amendments.  Next came the firm’s desire for further super omnibus trading, an area where FICCA is increasingly a fund-imposed prerequisite.  Finally, Mid Atlantic hoped adoption would expedite the process of expanding agreements into new share classes.

Beyond the contractual considerations, Coletti saw the document as a potential tool for lowering costs of responding to fund due diligence inquiries.  “Given the high coverage of primary risk controls within the FICCA,” she explained, “we expected fewer calls, compliance visits, and follow-up ‘spreadsheet’ questions.”

Have results lived up to expectations?  As predicted, FICCA adoption has already “greased the wheel” on expanded agreements and reduced the volume of fund-formatted questionnaires.

But perhaps even more notable were the unexpected benefits.  In preparation for the initial audit, Mid Atlantic revamped and improved internal procedures to address the specific controls.  And once the report was distributed, more targeted fund follow-up provided Coletti’s team with a better understanding of risk assessments and concerns.  The deeper discussions forced better clarifying language into the firm’s second FICCA, an audit that generated superior results.

Outlook on Third-Party Vendors

The Mid Atlantic team was originally concerned with fund partners outsourcing intermediary audit report review, but as Coletti noted, “The repository model makes a lot of sense”—and not just for fund companies.  Intermediaries who engage with third parties are able to streamline report distribution and guarantee the documents end up with the right person at each fund.

Coletti also advised that even smaller funds outsource the review.  Having fewer positions with an intermediary weakens the chance of receiving fund-specific questionnaire responses.  Instead of relying on questionnaires, third-party experts can extract data from audit reports that fulfill the fund’s requirements.  This, along with direct access to the results of intermediaries partnered with the third-party, provides smaller firms with control details that would not be accessible otherwise.

Most importantly, noted Coletti, outsourcing enriches fund follow-up and helps Mid Atlantic continue to improve their control environment.  Third parties equip firms with the most comprehensive feedback when following up, and the standardized scoring is a superior alternative to the potentially varying styles of each fund company.

Tips for Fund Follow-Up

“More feedback.”  This was Coletti’s #1 request.  FICCA control gaps can often be filled through existing documentation, but only if funds ask for it.  And as she mentioned earlier, deeper feedback inspires Mid Atlantic to rectify gaps for subsequent audits.

Coletti closed out the conference presentation by sharing her formula for successful follow-up meetings.  “The most productive feedback comes when funds visit on site about 3 months after receiving and reviewing audit documents,” she recalled.  The due diligence team should be accompanied by compliance staff, be able to cite the individual who read each report, and have the reports on hand for any second review of key areas.

Coletti especially appreciates any fund-provided peer comparisons.  She emphasized the importance of knowing where Mid Atlantic stands and where her firm can improve. “If you’re touching fund products, you have an obligation to everyone in the chain.”

About Michele A. Coletti, CEBS, QKA

Michele Coletti joined Mid Atlantic in 2008 and serves as Executive Vice President with oversight of trust product management, mutual fund services, broker/dealer home office services, internal audit, and trust compliance.  She has over 28 years of experience in the retirement plan industry in various roles encompassing the recordkeeping, compliance, and trading of qualified and non-qualified plans.

In her role as Trust Product Manager, she spearheads new solutions for Mid Atlantic’s open architecture platform providing custody and clearing support to intermediary partners and outside dealers.  Ms. Coletti also manages the Mutual Fund Services team responsible for negotiation of mutual fund selling and servicing agreements, fee and commission invoicing and collection, dealer compensation solutions, and fund compliance.  In 2017, she assumed oversight duties of Mid Atlantic’s enterprise risk management functions including internal audit and compliance.  She also launched the Home Office Services division, which provides a variety of compliance and processing-based solutions, primarily to the large broker/dealer marketplace.

Prior to joining Mid Atlantic, Ms. Coletti spent 13 years with SunGard managing key vendor relationships and initiatives.  She is a member of the Investment Company Institute’s Bank, Trust, and Retirement Advisory Committee (BTRAC).  A summa cum laude graduate of St. Bonaventure University, Ms. Coletti also holds the Certified Employee Benefit Specialist (CEBS) designation from IFEBP and the Wharton School, as well as the Qualified 401(k) Administrator designation (QKA) from the American Retirement Association (ASPPA).

About Mid Atlantic Capital Group

Mid Atlantic Capital Group is a leading financial services organization that provides a wide array of brokerage, advisory, and trust services to a diverse national client base of financial advisors and institutions, asset managers, and benefits administrators through its various subsidiary companies.

For more information, please visit www.macg.com.

About the Author

Kevin Flanagan is NQR’s Marketing Manager and a member of the firm’s Business Development Team.
His contributions help to ensure the continued satisfaction and growth of NQR’s client community.

Mr. Flanagan earned his BA from UNC Greensboro and MBA from Northeastern University.