Tailor Made Tech Solutions Making Investments Accessible

8.09.2020 / BY ADMIN

Tailor Made Tech Solutions Making Investments Accessible

From starting as a software developer to becoming a unit trust third-party administrator of choice and regional market share leader, Silica has come a long way in the past 20 years. CEO Garth Smith tells Enterprise Africa more about how this inventive organisation will grow its clients further in the future.

For Sandton-based software and third-party administration company, Silica, 2020 looks set to be an exciting and prosperous year. The company, owned by Investec Asset Management, is pushing an exceptional new product while planning further international expansion.

From establishment more than two decades ago as a tech/software division of Investec Asset Management, serving the changing needs of investors and asset managers, Silica has grown to become a vital aspect in the transactional and administrative process for South Africa’s unit trusts and mutual funds.

By using technology, data, and the power of digital, Silica is driving efficiencies and costs for investments to be managed more efficiently. CEO Garth Smith tells Enterprise Africa more about the company’s new Graphite solution, and how it will further enhance productivity for clients.

We had wealth managers approach us, saying they were dealing with multiple, large asset managers, who were our clients and were sending each asset manager individual instructions to be processed,” he begins. “They questioned whether there was a way to consolidate these instructions across the various asset managers for digital processing. We decided to build an interface, or a switch, where wealth managers could connect to their portfolio management systems, which would automate and streamline the execution of their instructions to the asset managers. That is where the idea for Graphite came from.”

GRAPHITE

Graphite is a system designed to integrate into the operations of our asset management clients so that wealth managers and financial advisors can seamlessly access funds, speedily and cost-effectively. The technology combines with the existing Silica technology and capability so that all information and instructions captured at source are executed through a single cash and application process. The performance of funds can be tracked in real-time and this allows clients to adapt their service quickly.

In 2017, Silica approached Investec Asset Management with the idea for the new product. After development and piloting, Graphite was officially launched in May 2019.

“We wanted different thinking and we adopted a strategy of assembling a team completely outside of our existing team,” details Smith. “We based the new team in Cape Town and partnered with an expert company, NML, to build the technology and integrate it into Silica. NML is still our partner on the journey.”

NEVER STANDING STILL

 Silica’s team is made up of industry professionals with a deep understanding of the market in which the company’s technology and innovation are put to work. Smith himself is a veteran of Stanlib, Standard Bank and Liberty Life. Embedding Silica further into the operations of its clients is important. This is why the company is always in motion and on the lookout for opportunities where improved tech and digital revolution can improve ageing systems.

Back in 2018, Silica partnered with IRESS to automate trading of unitised investments, digitising the process to lower costs for all players in the value chain – a partnership that thrives today.

“With trading volumes decreasing, some stockbrokers were looking to expand from just offering equities, to include unit trust funds.  So we partnered with IRESS, using their Smarthub system to create a capability to electronically trade both equities and unit trusts via a single portfolio management system. This widens the distribution channels that are available to our asset management clients while reducing costs,” explains Smith.

Silica has proven its ability to go beyond software development. As industry-leading experts in the trade technology space, utilising knowledge of the market, the company is continually but sustainably growing its product and service portfolio to help grow the business of its clients.

“Our team built digital KYC and digital signature capabilities which wealth managers can integrate into their front-end systems so they can transact completely electronically.

“We have registered a retirement annuity and other pre and post-tax products for the independent wealth management market. We see these products as building blocks for wealth managers and large financial advisors to use to expand their practices and grow their brand,” outlines Smith.

The result – a rise to the top of the industry and a strong position in terms of market share and reputation.

“We believe that Graphite is a very unique offering without a direct competitor at this stage,” says Smith. “Some of the traditional LISP providers might see themselves as the competition but we don’t treat them as such and believe they could become clients of Graphite. We are saying that the differentiator of LISPs shouldn’t be execution, which gets commoditised, but rather driving great client experience. If you want to commoditise, come to a place where that can be done at scale ”

NEW GEOGRAPHIES

 Having conquered much of the South African trade technology space, the next growth frontier for Silica is abroad. The company is already active in the UK and the Channel Islands, and Smith sees further international expansion as evident and necessary.

“There is a limit to how much you can grow in a single market. Once we are further into the Graphite product build, we will look to expand into different geographies,” he says. “We believe our strengths are that we are specialists, focussed and consistently develop a deep knowledge of the market we are servicing.”

“We have around R500 billion in assets under administration outside of sub-Saharan Africa, with R200 billion of that in the UK” he adds. “This gives us a toe hold there which keeps us relevant so we can look at increasing our presence in those markets at a future date.”

Expansion outside of South Africa will result in exposure to global best practice and world-class service providers which is beneficial for the business.

“Globally in this industry, there is huge price pressure and still much to settle after Brexit and other influences. We have chosen a path where we have a deep understanding of what we are doing and where we can partner with our clients.” says Smith.

He confirms that more new ideas are in the pipeline but remain in the development stage while Silica decides on its medium to longer-term strategy.

SOUTH AFRICAN ROOTS

An imminent change for Silica is the movement of its owner Investec Asset Management from the listed Investec group, becoming Ninety One Fund Managers – itself a listed entity on the JSE. The name Ninety One reflects the heritage of Investec Asset Management, established in 1991, and the rebrand and demerger are aimed at providing better service and outcomes for clients as an independent asset manager.

Smith, who joined Silica in 2015, details more about the initial development of the company as an answer to a call from Investec.

“Investec Asset Management needed a new registry platform for unit trusts and mutual funds. The local incumbent was not seen as adequate to take the business forward. The feeling was that there was insufficient investment in the platform and, because of the environment at the time, there weren’t any real international players in the market,” he details.

“To get an international player in the market was expensive. So, Investec decided to develop a proprietary system in-house. In planning, they selected an analyst, Daniel Micali, who knew a lot about the business, enlisted Michael Prentice as MD, and partnered with a local software development house. This team was tasked with ‘designing software for a client registry business system for unit trusts’.

They were successful and Investec Asset Management proposed that should they ‘onsell it to a few new clients within two years, Investec would branch the team off into a separate company, rather than being an in-house department’. Consequently, a market-leading platform was created and Silica was established as a software company.”

After approximately five successful years, during which Silica had achieved phenomenal growth, the undeniable next step was to advance into third-party administration, a request from both local and international clients, who required not just a software solution but rather a full third party administration service.

The Silica team returned to its shareholders to explain their findings in the market. Investec agreed and became the primary, anchor client for Silica’s third-party administration services. This commitment from Investec gave Silica a base from which to grow into the UK and assisted in expanding the South African client base, all while converting software clients to TPA.

The next step in the Silica story was going digital, however, Silica needed a better understanding of the appetite of its clients and their customers. Once the cost and convenience of digital transacting were clear, clients were eager to partner with Silica on their digital journey.

“Asset management differs from banking. When banking online, customers transact and view bank accounts fairly regularly, unlike investors who instead buy-in and wait and rarely view accounts or make switches. Financial advisors agree that people are quickly adapting to digital.”

Silica is firmly behind this move to digital and, despite making significant revenues from manual transactions and data capture, is ready to support clients where necessary on the journey toward digital ecosystems.

THE UNIQUE, THE SPECIAL

“Four years ago, Silica decided to redefine our purpose,” says Smith. “We wanted to be more than just a company with a statement about being the best third-party administrator in the market. We went through a thorough process to identify our existing purpose of ‘making investments accessible’. We do that by providing our clients and asset managers, the products and services to help them grow their businesses – this is a core driver for us.”

One shared factor across all successful business operations is a positive culture. This is simply a must for success. At Silica, culture has received considerable attention and it is this very culture that is the backbone of Silica’s brand message of ‘making investments accessible’.

Like most businesses, especially tech businesses, people are at the heart of everything achieved in the past, and everything that is planned for the future. The company admits that its success is intricately tied to its people, so there is a constant focus on nurturing and developing an outstanding company culture.

To ensure the company’s innovative culture and human-centric work environment, Silica is committed to investing in upskilling its people – despite the possible outcome of our employees leaving.

“We looked at our culture and drilled into the values and behaviours that supported it. A business can have a noteworthy value statement but unless it creates positive behaviours, it’s just writing on the wall. When a company digitises its business and drives automation, there is a significant impact on employees. Silica was transparent about the potential impact on jobs and created a learning culture that could better skill staff for the future of work. We established the Digital Learning Academy where our employees have access to online courses and mentors and work together to develop themselves. The academy is free for all employees and we celebrate as much when staff upskill and secure a role elsewhere, as we would when they upskill and stay with Silica,” says Smith.

“We have to take people on a journey,” adds Smith. “If we have people who are in roles that may no longer be relevant, we have to explain why, be open, and offer opportunities to reskill. The world is changing at an incredible pace, along with the expectations of our clients.  People have to be adaptable.”

This idea has been introduced to ensure a fluid mindset among the company’s 480 people – there is no chance of remaining unchanged and too comfortable.

By mid-2020 Investec Asset Management will be Ninety One Fund Managers, Graphite will be forging ahead, Silica will have made global inroads, and new faces will have started arriving at HQ. This company is proof that the investment world is constantly in motion and is testimony to why digitising, and partnering with experts is so important. For Smith, there is no complacency.

“It’s been a hard but very rewarding journey. We are optimistic about the future but fully aware that it is not just going to happen, we have to make tough choices. If we want to build a great culture, it has to be owned by everyone and led top-down, or it will not be entrenched.

“Whilst we do anticipate headwinds, we also believe there is ample opportunity out there.”

Some of the biggest names in the business trust Silica: FNB, Stanlib, Nedgroup Investments, Investec Asset Management, Old Mutual, Alexander Forbes Investments, Prudential Investment Managers, Capricorn Asset Management, Ashburton Investments, Sanlam and more are all running Silica systems, and all have benefitted. Technology is the backbone of business that helps set the best apart from the rest. For Smith and the entire team at Silica, the future is certainly looking bright.

Enterprise-Africa August 2020


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