ACL Success Story – Banking & Finance – Investor’s Group Inc.

2010-08-01

Investor’s Group Inc.

“For more than 10 years, Investors Group has relied on ACL. The software is easy to use and allows us to review large volumes of data quickly and efficiently. ACL gives us a competitive edge – and allows our company to audit millions of records to ensure each client’s assets are being managed and protected to our Investors Group standard.”

Brad Kirk, Manager of Internal Audits, Investor’s Group Inc.

Investors Group Inc., Canada’s largest mutual fund company, provides a full spectrum of financial planning services through a network of more than 38,000 financial consultants, planners, and brokers. Ongoing compliance with ever-changing regulations in the mutual fund, insurance, and securities industries is made possible using ACL technology to continuously monitor transactions and conduct detailed operational reviews. Facing increased competition and the need to find innovative ways to grow its business, Investors Group acquired Mackenzie Financial Corporation in 2001. The company now operates as two business units – Mackenzie Financial and Investors Group – each with its own distinctive products and services delivered through separate advice channels. ACL solutions play an important role in consolidating and validating financial and operational reporting information derived from disparate systems and highlighting areas where cost savings are possible through economies of scal

Customer Profile

Headquartered in Winnipeg, Manitoba, Investors Group Inc. is a mutual fund, managed asset, and personal financial services firm. With 2.6 million clients and more than £36 billion in assets under administration, Investors Group is an industry leader in Canada ’s financial services sector.

Applications

Investors Group has relied on ACL solutions for over 10 years, consistently expanding its use of ACL technology to include: strategic internal audits; fraud detection and prevention; compliance with regulatory requirements; and consolidation of operations and reporting post-Mackenzie acquisition.

Challenges

While market downturns pose challenges to all publicly traded companies, Investors Group revenues are based on mutual fund assets under management. Even with increased productivity, the bottom line is hit hard during a market slump, creating more pressure for effective cost management. To minimise exposure to business risk, the Investors Group’s internal audit team must constantly ensure that internal controls enable the organisation to operate at peak efficiency and effectiveness. Upon the acquisition of Mackenzie Financial Corporation in 2001, this role became more complex, with the need to reconcile data and reporting for various business and financial functions – while maintaining two separate operating divisions.

This pursuit of operational excellence is further complicated by the highly regulated mutual fund and securities business environment within which the company operates. The Investors Group must constantly analyse and test its large volumes of data and transactions to meet requirements of several oversight bodies, including the Mutual Fund Dealers Association, the Investment Dealers Association, the Canadian Deposit Insurance Corporation, and the Financial Transactions and Reports Analysis Center. Each entity has strict regulations governing quarterly and annual compliance reporting. As a financial services organisation, Investors Group must also meet the challenges of identifying potential money-laundering activities and terrorist financial holdings.

Solutions

Under its flagship brands, Investors Group offers clients a wide variety of financial products and services through its nationwide network of more than 38,000 consultants and financial planners. To manage commission payments, the internal audit team uses the powerful analytics of ACL technology to implement a year-end sample valuation process This ensures that each representative is properly compensated on the thousands of financial transactions processed each year. “We have used ACL software to review our annual commission payments for the last five years. We know it has saved us significant time and money by catching errors that may have been previously undetected,” says Brad Kirk, Investors Group manager of internal audits.

The corporate general ledger also contains thousands of accounts that represent the various products and services sold by Investors Group. Accessing accounts from the OS/390 mainframe, and flat files and reports from various data sources, ACL technology is used to analyse transactions drawn from multiple system platforms and business applications to reconcile with the GL entries. “Other software packages have limits of up to 16,000 lines, which don’t meet our extensive data needs,” Kirk comments. “By using ACL to streamline our audit services, we improve our operations by adding value in areas related to valuation accuracy and regulatory compliance.”

Investors Group has also taken a proactive approach to addressing challenges of complying with ever-growing lists of regulations governing the financial services industry. Its overall compliance strategy includes independently checking and monitoring for large value cash transactions which exceed the legislated £5,000 threshold and testing for “high closing”. “High closing” occurs when a mutual fund manager artificially bids up the price of a security before the fund’s quarterly assessment. While it has never occurred at Investors Group, this has been a problem for other mutual fund companies. Using ACL technology, Investors Group staff can easily analyse thousands of stock prices and look for any unusual or suspicious trading activity.

Knowledge of and familiarity with ACL technology enabled internal auditors at Investors Group to quickly and effectively audit Mackenzie Financial Corporation’s business and controls processes to ensure the new acquisition was compliant with regulatory requirements. They also reviewed both companies’ vendor lists to leverage their combined purchasing power for sizable cost savings.

Results

Investors Group has used ACL technology to:

  • Perform sample valuations on consultant commission fees and compare them to annual sales records to ensure they are accurate and error-free
  • Review client records for cash deposits over £5,000 to comply with reporting mandated by the Canadian Proceeds of Crime (Money Laundering) and Terrorist Financing Act
  • Develop a list of common suppliers and vendors and the relative expenditures of both Mackenzie and Investors Group, as part of back-office operations integration. Following this analysis, Investors Group developed a preferred list of suppliers, resulting in overall corporate savings of £295,000
  • Continuously monitor mutual fund trading activity to ensure ongoing compliance with a wide variety of industry regulations
  • Develop and implement effective fraud detection controls testing which has helped to prevent any problems with fraud or compliance violations within the company
Sunday, August 1, 2010 In: Client Success Stories, Hot Topics Comments (None)

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