A fresh look at Investment Control - Part II
Updated: Jul 8, 2020
Following on from Part I - in this chapter we will discuss a couple of areas that are crucial to successfully manage your data and investment control functions within your business.
Collaborative approach to making your operations efficient - the value in seeking advice and working with people who have done it before.
Size matters but doesn’t dictate the solution - being aware of what is in the market is crucial, no matter how big or small your organisation is.
Before we continue on the Investment Control journey, let's look at a typical problem faced by investment organisations when it comes to have a single trusted source and independent verification of your investment data.
When we talk to asset managers and super funds, the picture above generally illustrates the problem we come in to solve for them.
Multiple sources of data, multiple internally systems (e.g. trading system, analytics platform, investment decision platform etc.) and multiple external stakeholders as part of the downstream recipients.
In our experience, the most common solution that either exists already within the organisation, or that the organisation is contemplating is:
Excel - cheap but not viable as a secure or scaleable data solution.
Internal IT Staff - charged with the build of an internal SQL database.
Both are workable solutions until a certain point. It's at this point cracks start to show, normally due to business growth (new products, clients etc.) or regulatory changes puts pressure on the organisation.
This is where we recommend you look to the next two principles of looking at solving your problem.
Collaborative approach to making your operations efficient
Imagine this example... A bricklayer, carpenter, electrician and roofer have to build four houses.
Before they start, they get together and agree how a house is built. Afterwards, they each go to their respective house, and start building.
The bricklayer gets started very quickly. They do a great job with the walls of the house, and an ok job with the carpentry work. But they forget what the sparky told them about wiring the house correctly.
The other 3 quickly hit a wall (so to speak)… their walls and foundations are not very stable or straight for that matter.
The end result, as you can imagine, are four homes that probably wouldn’t pass the Australian Building Code.
Instead, if they had understood the value each other brought to this process, they could have collaborated and worked together on each house. They may have worked sequentially, but by the time they got to the 4th house, they would have been pretty efficient in their process.
Unfortunately, we see the same approach in our industry far to often. Organisations will often look to build on their own technology. This can be an ok solution, if they have significant internal resources to do so. However, the end result is a multiverse of the same solutions, trying to achieve the same thing.
Most of these duplicated technology could be avoided by asking these four questions:
Can we build it FAST enough?
Can we build it WELL enough?
Do we want to KEEP building it?
What ELSE could we build with the time and money?
For most investment organisations, building technology solutions is not core to their business, So rather than trying to build themselves (like the bricklayer, carpenter, electrician and roofer), the progressive organisations find a trusted partner (or partners) where collaboration is key to each other's success.
Size matters but doesn’t dictate the solution
What do we mean by this?
As you grow, your operating model can and will change. Growing your analyst functions, in-sourcing of middle office teams, expansion of operational staff and so forth.
There is no doubt that various functions require different tools. And what we often hear are that organisations fear situations where if you are a small fund, you feel the solutions out there are just too big for your smaller operations. And if you are a big fund you are afraid of getting something where you feel constrained or that the solution is not proven.
So how do you find the right solution…?
The best advice to that is… keep your finger on the pulse and talk with as many people as you can.
The FinTech space is a fast moving industry and it is keen and capable of helping small as well as large organisations.
However, even the people within the industry is finding it hard to keep up with the pace, so it is understandable if the FinTech clients is not aware who is out there.
For example, below is an image of the FinTech Ecosystem as at June 2017.
How many names do you recognise? Do you really know what they do? Would a consultant? And what names are not on there? Remember, this is focused on FinTech, more than InvestTech. For example, we are not up there. And so too, are many of our peers who have launched excellent products in recent years.
Technology allows us to now roll out new solutions at speeds much faster than some of the older names in the industry have ever been able to. And this map attests to how fast things can change.
In short - make sure you are educated and be open to new solutions.