The seven new tools that are driving innovation in investment operations
Olivia Vinden, Director, Alpha Financial Markets Consulting, examines the seven major technological tools that are helping institutional investors transform operations
Insurance Investorposted on Tuesday, June 30, 2020
When it comes to change, budgets ‘Operations’ has often lagged behind other functions – it doesn’t have the clout of Investments, the client-led demand of Distribution or the pressure from the regulator in Compliance.
Too often when there’s a problem in operations the answer has been to add new people or deploy bespoke processes, but a combination of new technology, cost pressures and a greater demand for enterprise insights is meaning that asset managers are finally investing more.
Here are seven new innovations that are helping fund operators transform their Operations functions:
Dynamic Operations Checklists: Operations has always been ‘checklist heavy’ – and they’re a great way to prevent mistakes and prove activity for compliance purposes, but the humble checklist is getting an upgrade.
The improved operations checklists combine automatic capture of technical data – e.g. ‘what time did my start of day files arrive?’ with human-completed task lists that show progress through required activity.
New checklists which are accessible via a browser are easier for users and enable better audit, but the real improvement is that managers can compare historic checklists and capture meaningful MI – e.g. is there a step that always takes longer than expected on a given day, is there a step that often gets missed. These insights can highlight where errors occur and where efficiencies can be gained.
Dynamic Dashboards: we have worked with a number of managers to build dynamic dashboards that are driven by underlying real-time data.
These dashboards can be used to quickly identify issues, highlight KPIs and drive productivity.
A typical ‘COO’ dashboard might show ‘confirmation fails’, ‘corporate actions going ‘ex’’ or progress through ‘operations checklists’, to name a few.
The dashboards can be accessed from mobile devices and shown on screens in the office bringing the team together around a common set of metrics.
Workflow & BI: Asset Managers are moving towards structured and flexible workflow processes to reduce the reliance on MS Office tools and new business intelligence tools to focus on the key operational risks / issues.
On-boarding/transitions is one area where workflow can significantly enhance the customer experience and speed of execution.
Physical processing: Operations is still plagued by manual keying and legacy processes which require wet signatures, or even fax machines.
These processes were already being targeted for elimination pre COVID-19 but the pandemic has upped the urgency.
There are a range of different technologies that can be employed here – digital signatures, APIs, new and improved OCR tools but it’s clear that the risk and overhead of physical processing is no longer tolerable.
Vanilla reconciliations are largely automated, but there remains a sub-set of reconciliations and validations where manual processing is required e.g. from CSAs in PDF. OCR and data manipulation tools can significantly reduce the effort and risk of these processes
Third Party Connectors: Operations involves exchanging data with key eco-system third parties and we are seeing all major industry participants including investment consultants, TPAs, vendors and, albeit slowly end clients looking at ways to exchange data in ways which are more secure, less prone to error and less bespoke.
At the moment, companies are investing in their own APIs that are a good step forward and we have seen significant benefit from their adoption – but the next goal for the industry should be a more standard library of APIs that we can all coalesce around.
Real-time & intraday IBORs: Investment teams are becoming more and more demanding about their data needs and operations teams are running to keep up.
We are seeing significant demand for intraday updates to cash requiring better connectivity with transfer agents and custodians in particular.
Asset servicers are all developing their offerings in this space in order to compete with tools such as Aladdin or Bloomberg AIM. There are also a number of fintechs building out products in this space.
Proxy Voting: Asset Managers are increasingly concerned with active shareholder oversight. Proxy voting and the data model associated is a key area of investment for market utilities and participants