Ben McCormack, Associate Director – Head of Analytics Reporting & APIs Product Development at FactSet Research Systems, discusses the need for asset managers to protect their technology investments and the inherent challenges of predicting the time to come.
One of the terms you will often hear today in investment management technology circles is ‘future-proofing’. It’s a phrase that asset managers, consultants and vendors like to use, as it gives a sense of reassurance to everyone in the room; ‘this technology investment will be safe’. I’ve used the term myself, many times. I confess.
Unfortunately, ‘future-proof’ technology is the investment management world’s equivalent to the ‘unsinkable’ ship. The truth is that no technology is truly future-proof, just as no ship is unsinkable. This doesn’t mean, however, that vendors cannot build a system based upon a roadmap of the future direction of the investment management firm for one, two or even three years, but the reality is that software vendors cannot predict the future any more than asset managers can.
Investment management is seemingly in a perpetual state of flux, with political, economic, regulatory, client and margin-related pressures brought to bear (sometimes at short notice) with the result that Operations Directors need to be able to respond in a nimble, agile fashion. Internal factors such as changes in investment strategy, asset class, geography or simply the rapid scaling of clients can all impact a firm’s operations.
The manner in which financial institutions and their technology vendors co-operate is one way of achieving this agility. A small number of smart firms will work more closely with vendors, encouraging and sponsoring innovation, but this is not currently the mainstream. Many asset management firms are largely reactive to technological advances and the industry is currently still suffering from the ultra-conservative approach that followed the economic downturn almost ten years ago. As a consequence, asset managers currently have a supplier profile that their own industry has created.
Asset managers must embrace technology better, be more prepared to be early adopters and view technology as a key competitive advantage. This change extends beyond mere functionality and must include a cultural shift to an environment that is more fluid and agile. To embrace technology fully, firms must be in a position to upgrade their technology infrastructure more rapidly than they do today. This means investing in and developing much closer ties with key software providers, benefiting more from their skill-sets as well as the functionality that their systems deliver in order to evolve to new market conditions and opportunities.
Asset managers should also introduce far better oversight of their suppliers and ensure that they are fully cognisant of their suppliers’ strategies. Asset managers must also have mitigation plans for all key applications and technology. The retirement of the Barclays POINT platform is a great illustration of how this foresight is completely lacking in most firms at present.
It will never be possible to fully future-proof any kind of software, but adopting a more agile approach to technology will help financial institutions change course and avoid being holed below the waterline.