Members of the Association of solicitor Investment Managers are making the most out of the new electronic share dealing system, says Andrew Murray. Andrew Murray is head of the financial services unit at Lawrence Graham. The transfer to Crest – the Stock Exchange's electronic share dealing system – over the past few months has been a difficult and time-consuming process for the financial markets, from individual shareholders to company registrars.
Solicitors have been at the frontline of this transition because they are responsible for managing and administering hundreds of millions of pounds worth of stockmarket investments for private clients, trusts, companies and pension schemes. At the vanguard have been members of the Association of Solicitor Investment Managers (Asim).
Crest's most obvious impact has been on the dematerialisation of stock – the conversion from the system of share certificates to a computer record of shareholdings.
Lawrence Graham administers approximately £70m of private and trust investments and the vast majority of this is stockmarket-based. This has meant converting many hundreds of share certificates to Crest and our first priority was to take up a sponsored membership of the system through LawSafe.
By converting the majority of shareholdings to our nominee company in designated funds over the past few years, we have saved a great deal of time and effort.
The dematerialisation stage was extremely time-consuming, but to maintain our client's goodwill and to keep our competitive edge, we had to bear the time cost ourselves and not pass it on to our clients.
The Crest dealing process is a remarkably simple procedure and with the help of our Crest suppliers we are able to complete transactions with maximum speed and efficiency.
Surprisingly, the tables have been turned when we deal with stockbrokers. They have found the administrative side of things a problem and the dealers seem to find it difficult to give full and correct instructions to their back-office staff. But this is quite understandable considering the onerous regulatory regime dealers have to follow in the larger firms.
We have even occasionally found ourselves in the strange position of having to fax or phone through instructions to stockbrokers on the procedures they need to adopt to effect a transaction properly in Crest. However, things have now improved and stockbrokers are generally conversant and up to speed on doing deals through the system.
We seem to have outdone the stockbrokers in this area and our in-house share dealing service always seems to run more smoothly than when we are obliged to deal through the old broking channels. This experience appears to have been shared by many other Asim members.
Crest has been one of the largest administrative tasks for solicitors since the introduction of the Financial Services Act and the Solicitors' Investment Business Rules. For a central London firm like ours it has meant absorbing an enormous amount of cost in terms of time, buying hardware and general effort. Overall our aim has been to provide the best level of expertise and service for private clients and trustees at a price that competes strongly with other investment advisers at all levels in the City.
The next important stage for Asim members will be the full range of unit trusts going onto Crest. The Bank of England has announced that the Gilts market as a whole will also go on to the system, which will make them much quicker to trade.
However, there is no date set for this development – it was announced last autumn and scheduled for this autumn but there has been no further news.
Law firms involved in investment management can give advice to other legal practices on how to manage and administer investments for their private client and trusts work. This keeps the service provision in the profession and means that solicitors do not lose control of their clients investments which would otherwise go to stockbrokers.