Fee Management Too Crucial to Rely on Inefficient Manual Processes

By Jason Davenport, Delta Data 

Intermediary fee payments are one of the top expenses in the mutual fund industry, accounting for as much as 40 percent of a firm’s total annual expenses. The complexity and the volume of these fees continues to increase, which means it’s crucial for a mutual fund company’s fee management program to be robust, efficient, and all-encompassing in order to avoid erroneous expenses, inefficient allocation of resources, and unnecessary risk.

Whether it be on a monthly or quarterly basis, asset managers are consistently inundated with fee invoices. Operations teams must parse through all of those invoices to verify that each one is correct and that it aligns with the intermediary’s particular agreement.

Additionally, they need to be able to allocate the payments correctly and capable of providing regulators, as well as their own firm’s board of directors, with documentation that confirms correct payment allocation.

And yet, fee processing is still largely conducted manually industry-wide, while most other major expenses incurred by firms are serviced and rely on proprietary software solutions. Operation teams must start to shift from the outdated, manual nature of Excel spreadsheets and explore more robust, automated solutions to streamline the invoice validation process.

Excel Spreadsheets and Manual Data Entry

While most mutual fund companies have embraced purpose-built software and/or third-party outsourcing for major expenses like payroll and property management, many of those same firms continue to rely on inefficient manual processes when it comes to intermediary fee payments, one of their greatest annual expenses.

Instead, they manage invoice receipts with manual data entry processes and manually email Excel spreadsheets to process, validate, and document intermediary invoices, offering themselves up to fall victim to inevitable human error that accompanies manual processes and inadvertently exposing themselves to the unnecessary risk and consequence of failure to comply with current regulations.

As a result of their reliance on manual processes, with all their disparity and limitations, many firms have incurred penalties for overpaying invoices or incorrectly allocating fees.

Effective Fee Management Program Automation

These are all situations that could have been avoided if any of the proven solutions currently available for fee management had been utilized. These streamlined tools automate invoice processing and fee management workflows, while producing rapid and accurate analysis of granular-level fee data to protect against significant regulatory or financial risk.

Three key processes make up the foundation of an effective fee management program, and all three of those processes can be automated to more efficiently allocate time and resources.


The first process is running calculations to validate that the invoice is correct and matches the assets on which they’re billing. In order to do this first step, the mutual fund company requires omni transparency data, which isn’t easy to analyze in Excel files.

Many still manually crunch these numbers, so automation is a simple way to optimize this part of the process and reallocate the time and responsibilities of personnel to more strategic tasks.

Reasonability Checks

The second process is conducting reasonability checks to affirm that the payment aligns with the intermediary agreement and prospectus. This is not an overly complicated task by itself, but when you consider that fund companies often work with dozens of broker-dealers and distribution teams, the time required to manually pore over this data can add up quickly.

Allocation and Reporting

Payment funding allocation and reporting make up the third, and most critical, component of an effective fee management program. Ultimately, fund companies must substantiate to regulators and their boards of directors that the payments made to intermediaries are accurate and compliant.

As fund companies work through omnibus accounts to distinguish between the intertwined 12b-1 fees, revenue shares, and sub-TA fees, manual processes and the lack of transparency make accurate and consistent reporting a major challenge, while leaving the firm open to financial and regulatory risk.

Aside from the regulatory and compliance implications, it’s a matter of good operational sense to ensure payments to broker-dealers and distribution teams are consistently accurate. Like power bills, these payments vary from month to month.

Rather than blindly pay the invoiced amount, fund companies should confirm that their statements account for any fluctuations to avoid overcharges, and automation tools are able to ensure optimal accuracy and absolute consistency. Even small errors make a difference, as any variance can result in a substantial fine, in addition to the revenue lost as a result of overpayments.

What Does It All Mean?


Full audit capabilities for role-based duties include detailed information, consistent rules, and payment execution, ensure compliance with regulations such as “Distribution in Guise.”


An automated fee management solution should include comprehensive sub-omnibus data, which facilitates reduction of human errors and inconsistency from manual processing.


Straight-through processing allows resources to focus on exceptions, and tolerances allow focus on greatest variance, saving a firm time and resources in what they dedicate to fee processing.

Delta Data Fee Management

Delta Data’s Fee Management solution performs independent fee calculations using distribution transparency data, the firm’s contract agreements, and automated technology to maintain compliance and ensure accuracy.

Exception-based processing enables users to prioritize invoices when an exception is identified or a tolerance is not met, while error-free invoices automatically flow directly into payables management. This automated prioritization solution directs a firm’s resources to where they can be most efficiently utilized, cutting down on the time a firm spends on fee billing.

How Delta Data’s Fee Management Solution Works

Upon certification that the payment is correct, asset managers can perform reasonability calculations to ensure complete comfort with the payment. These reasonability tests check for things such as month-over-month comparisons, potential double-billing situations, asset changes, and more.

Once calculations are approved, the tool performs payment funding allocations. These calculations produce payment advice that allows asset managers’ finance teams to know exactly what to pay and from which general ledger account.

For the dealers that send separate invoices for platform fees, Delta Data’s Fee Management allocation calculations certify that asset managers are paying the right portion of the fee from 12b-1, Sub-TA, Rev Share, and others.

Fee Management Demands a Robust Solution

There are other solutions in the market that automate certain components of the fee management process. However, to effectively manage the countless invoices and improve operational efficiency, firms need to have a robust system in place that automates every step of the process.

Intermediary fee payments are too critical for firms to rely on manual processing and resort to emailed Excel spreadsheets. With automated fee management solutions, firms minimize inadvertent exposure to unnecessary risk, while allowing for improved efficiency of time and resources.


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