If you're a depositary or custodian, you already know the drill: annual confirmations looming, reconciliation breaks piling up, and your team buried in spreadsheets trying to verify ownership of increasingly complex asset types. It's the regulatory requirement that nobody enjoys but everyone needs to get right.
I spent years on the other side of this process, as a PE fund accountant, I was the one producing position files, coordinating with custodians, and preparing documentation for auditors. I've experienced first hand the operational strain of reconciliation breaks, the pressure of regulatory deadlines, and the complexity of managing multiple asset classes across different jurisdictions.
The problem? The way most firms handle asset verification today was designed for a simpler world, one with straightforward securities, clear custody chains, and far fewer regulatory eyes watching.
That world no longer exists.
The Perfect storm
Asset verification has become exponentially more complex over the past decade, and three forces are colliding to make it even harder:
- Regulatory pressure is intensifying. AIFMD 2.0 has expanded cross-border requirements. The SEC's proposed Safeguarding Rule would dramatically increase the scope of custody obligations. Regulators aren't just asking for better verification - they're demanding it, with tighter timelines and harsher penalties for getting it wrong.
- Asset classes are exploding. Your team used to verify listed securities and maybe some real estate. Now you're dealing with private equity, infrastructure assets, complex derivatives, digital assets, and loan portfolios. Each requires a different verification approach, different evidence, and different expertise.
- Operational costs are unsustainable. Annual surprise examinations for US RIAs can cost tens of thousands of pounds. European depositaries are spending weeks preparing year-end confirmations. And everyone's hiring more people just to keep up with the workload.
Meanwhile, your clients expect faster turnarounds, your auditors want more evidence, and your board wants to know why compliance costs keep rising.
The Email-and-Excel Trap
Here's what asset verification looks like at most firms today:
Your operations team receives position files from fund administrators. They export them to Excel. Someone emails sub-custodians requesting confirmations. Responses trickle back over days or weeks; some by email, some by secure portal, some by fax (yes, still). Another team member manually keys the responses into yet another spreadsheet.
Then comes the review process. Someone needs to check each response, approve or reject the documentation, and track what was accepted. Six months later, when questions arise, the team scrambles through emails trying to find "the response from last year." The deadline approaches. Some items remain unresolved, so someone drafts a disclaimer.
Finally, the confirmation goes out - until next year, when the entire process repeats, and nobody can quite remember what was accepted previously.
This isn't just inefficient. It's risky. Manual data entry creates errors. Email chains lose context. Evidence gets stored in someone's inbox. And when the auditors arrive, reconstructing the audit trail becomes an archaeological dig.
What If Verification Was Continuous, Not Annual?
Imagine a different scenario:
A fund acquires a stake in a private equity investee company. Your system flags it for ownership verification. You send the request to the investee as usual, but now when the response comes back, you can review and approve or reject it digitally within the platform - something you simply can't do with email chains or shared drives. The real magic happens next year: instead of starting from scratch, you just "roll forward"the previous request. All the investee details, previous responses, and approval history are instantly available.
A response comes back from an investee that doesn't meet your requirements. Instead of filing it away with a mental note to follow up, you can reject it directly in the platform with clear feedback, a capability that doesn't exist when you're managing everything through emails. The system tracks the outstanding item and escalates based on your configured timelines. When the correct documentation arrives, the approval history is automatically maintained, creating an audit trail that auditors actually want to see.
ACPA firm arrives for a surprise examination. Rather than scrambling to pull together evidence, you provide instant access to a complete, auditable verification trail for every asset, every transaction, and every exception over the past year.
This isn't theoretical. This is what modern asset verification looks like.
Why Traditional Approaches Can't Scale
The fundamental problem with manual asset verification isn't just that it's slow or expensive; it's that it doesn't scale with complexity.
When you're verifying 500 listed securities, spreadsheets work (barely). When you're verifying 5,000 positions across equities, private equity, derivatives, real estate, and digital assets, held through multiple legal structures across different jurisdictions then manual processes collapse under their own weight.
You can't hire your way out of this problem. Adding more people just means more emails, more handoffs, and more opportunities for things to fall through the cracks.
The only solution is to fundamentally rethink how verification happens.
A Modern Approach to Asset Verification
Leading depositaries and custodians are moving from periodic, manual verification to continuous, automated oversight. The shift involves three key changes:
- From point-in-time to real-time. Instead of verifying assets once a year (or once a quarter), modern systems verify continuously. New positions trigger automatic verification workflows. Changes get flagged immediately. Exceptions surface in real-time, when they're easiest to resolve.
- From fragmented to centralised. Rather than juggling responses across emails, shared drives, and filing cabinets, everything lives in a single platform. When verification responses come back, you can approve or reject documentation with a formal workflow, something impossible with traditional email-based processes. Year-on-year, you simply roll forward previous requests with full visibility to what was accepted. The dreaded "can you show us the response from last year?" question is answered instantly.
- From reactive to proactive. Traditional verification only catches problems after the fact - often months later. Modern approaches use automated workflows, intelligent routing, and configurable escalations to surface issues immediately and drive them to resolution before they become examination findings.
The Real Benefits
The firms making this shift aren't just seeing marginal improvements. They're experiencing step-change transformations:
- 70-80% reduction in manual effort. Teams that spent weeks on annual confirmations now complete them in days. Staff previously buried in chasing responses and searching through old files can focus on higher-value activities like exception resolution and client service.
- Instant access to verification history. When auditors ask "what did you accept last year?" or counterparties question your rejection, the answer is immediately available. No more digging through emails or hoping someone remembers where they saved the file.
- Near-elimination of examination findings. When auditors or examiners arrive, firms have complete, auditable trails for every asset. No scrambling for evidence. No gaps in documentation. No uncomfortable explanations about missing confirmations.
But perhaps most importantly, these firms are building scalable foundations. They can take on new clients, expand into new asset classes, and enter new markets without proportional increases in headcount or operational risk.
The Window Is Closing
Here's the uncomfortable truth: as regulations tighten and asset complexity increases, the gap between firms with modern verification infrastructure and those using legacy processes is becoming a competitive moat.
The depositaries and custodians investing in automation today aren't just reducing costs, they're building capabilities that will be difficult for competitors to match. They're winning new mandates by demonstrating superior operational control. They're attracting talent because their teams work on interesting problems, not mind-numbing reconciliations.
Meanwhile, firms still relying on manual processes are facing a difficult choice: invest in modernisation now, or find themselves unable to compete for complex mandates, unable to attract talent, and increasingly exposed to regulatory risk.
Where to Start
The good news? You don't need to transform everything overnight. The most successful implementations start with a focused pilot:
- Select a single fund or portfolio with relatively straightforward assets
- Implement automated workflows for the most time-consuming verification tasks
- Measure the impact on cycle time, error rates, and staff capacity
- Build the business case for broader rollout based on real results
The firms that start today will be ahead of regulatory requirements, ahead of their competitors, and ahead of client expectations.
The firms that wait will find themselves explaining to boards, auditors, and regulators why their operational risk is increasing whilst their competitors' is falling.
Ready to rethink asset verification? Request a demo of Circit Asset Management Confirmations to see how Circit can transform your verification operations.
