Third party administrators: behind the mask

Quality of service

It is common for Service Level Agreements (SLAs) between providers and their TPAs to demand a higher standard of reporting and performance measurement than providers set themselves in-house, as well as additional accountability that ensures standards stay high.

In addition, as TPAs work across wide range of clients for many different providers. They have an ‘industry-level’ view on the services standards of competing providers. This means that TPAs can benchmark standards against the industry and ensure that clients receive best-in-class service.

Reduce regulatory risk

In these days of increased regulatory oversight, accurate record keeping and financial reconciliation are essential for providers to meet their regulatory obligations.

Specialist TPAs offer robust systems and continual performance monitoring to meet providers’ regulatory needs. For advisers, this means they can be confident clients’ records are accurate and up to date, which reduces the hassle of having to correct errors and helps to ensure the firm meets its own regulatory and treating customers fairly expectations.

New products to market

Product providers want to be able to respond quickly to changing market conditions by launching new products. Unfortunately, many providers are experiencing backlogs in product development and pressure on IT development budgets.

Specialist TPAs enable providers to pilot new products quickly and efficiently. This ensures IFAs are able to offer clients a wider range of products and react more quickly to changing market conditions and consumer requirements.

We know that new products need to be administered efficiently if advisers are to recommend them to clients. Because the TPA is dealing with a wide range of products, providers and customers, they can work closely with providers and offer valuable insight to assist product design. This ensures that the systems behind any new product is optimised to deliver a high quality, responsive service for clients.

Legacy product administration

For every new product that is brought to market to meet new demand from clients, or to take advantage of new opportunities, there is a good chance that an old product will be closed to new business. Such products will still need administering for many years.

This presents a problem to providers who need to continue to service products that are dwindling in volume, and providing them with declining revenue streams and increasing maintenance costs.

By moving these ‘legacy’ products to a TPA administration system, providers can ensure that service standards are maintained for clients. Service enhancements, which would be hard for a provider to justify, such as online access can also be provided for these products using a TPA.

IT cost savings

Closed or legacy books of business are often administered on expensive, unreliable legacy IT systems, which take a disproportionate share of the providers’ IT budget. Outsourcing those products to a TPA can facilitate these expensive legacy systems being decommissioned, freeing up valuable financial and human resources, as well as improving service standards for clients. So, the next time IFAs pick up the phone to a product provider, it could be a specialist TPA providing the service they receive. If the TPA is really good at their job, they will never know.

Of course, the range and quality of services provided depends on the capabilities of the TPA and their remit from the product provider. The best TPAs, however, working with a well-considered contract and SLA from a provider can deliver administrative excellence.

In conclusion, specialist TPAs can help deliver a service promise to clients. They provide efficient product administration, helping to develop and retain client relationships. They can also deliver effective legacy product administration, reduce regulatory risk and help to bring high-quality new products to market quickly.

Stuart Ward is head of business development at  OPAL