Investment Management Operations: Improving firm performance through technology

For investment managers, “performance” is most often synonymous with investment performance. It’s usually how they promote and market themselves and how their value is perceived. But true firm performance is comprised of a variety of elements beyond investment performance, and includes operational efficiency, client service, and new business development, among others. In the past investment performance alone may have been enough to sustain business, but today the most profitable managers take a more holistic view of firm performance, inspecting all elements of their business under a microscope to improve efficiency and effectiveness. In this environment, operational performance is coming to the forefront not only for its functionality – how effectively a manager’s core capabilities are supported by operations work that is transparent to its front office – but also because it can be a true business value driver considering significant advances that have been made in the financial technology arena.

Technology is pervasive in our modern world and it has had a tremendous impact on efficiency in both our personal and professional lives. This can certainly be seen in investment management – trade execution that used to require personal connections and negotiations can now be accomplished by an algorithm; trade services and custodian communications that used to take days now takes mere minutes; client reporting that used to eat up hours of the day is now often created at the push of a button and read on a smart phone.

However, at the core of many investment management operations is a web of antiquated technology that has not participated in the “efficiency revolution” that technology advancements have provided in other areas. While there are many newer technology applications and systems on the market that are intuitive, nimble, and cost-effective, their adoption has been slow with delays often caused by perception alone. Four common misperceptions that create barriers to technology improvement are:

  • Existing technology that supports operations is too complex to replace
  • The volume and format of stored data inhibits easily adopting new technology
  • The cost in time and money to convert to new technology is too high
  • “Our operations have been working fine; why should I fix what isn’t broken?”

The current environment of market volatility, increasing complexity and expanded regulatory scrutiny is putting a spotlight on operational shortcomings. It is more critical than ever that investment managers shed their misperceptions and honestly assess opportunities for operational improvement. When considering adopting and onboarding new technology, operations professionals should evaluate the following areas:

  • Perspective: Making the best decision about upgrading begins with knowing exactly what you have in place (current state) and what your firm’s strategic goals are (future state). Identify the current pain points in your support infrastructure and any tactical hurdles to growth. Understanding and evaluating the value of your component processes will help create a forward-looking strategy for improvement.
  • Advantage: Once you understand why you need to change, you have to evaluate which systems and process upgrades have the greatest impact. Evaluate available products against your strategic goals. Will new investments be easily supported? Will process pain points and tactical hurdles to growth be removed? And finally, will everything scale to fit your growth and reduce overall firm costs, providing a competitive advantage with price while preserving margins?
  • Agility: One of the greatest barriers to change is the potential disruption caused by implementation and adoption. New systems, processes and support must accommodate your firm’s unique timeline and have the ability to pivot in the face of unexpected disruptions. Seamless transition, wholesale adoption and smooth implementation are key components to delivering a quick return on investment for any technology upgrade.

Enterprise solutions are now available as web-delivered technology, elevating the efficiency of operational performance. With barriers to efficiency removed, investment managers are challenged to identify which changes will make the greatest impact and – more importantly – how to evaluate when the time is right for meaningful change. Those who have considered the areas of Perspective, Advantage, and Agility are impacting their firm performance and surpassing others who are hesitant to change, adapt and grow.