July 19, 2015 | Bryan J. Dori, President/CEO
We’re all chasing growth. We do it for our clients, for our employees, for our boards of directors. We do it for our families and – if we’re honest about it – we do it for ourselves. Bigger is better, and getting there is a thrill that most executives simply cannot resist. At least, I can’t.
But planning for growth can be daunting. As I worked with our clients and the Archer team to plan our company’s growth, I was stunned to see a ‘real-life’ graphic of all the moving parts and the choices we had to make.
The investment management teams I’ve met are driving growth, too. They are looking to create revenue growth by leveraging their firm’s expertise while still delivering great performance in global markets. New products, new channels, new marketing strategies are being considered. As with any growth initiative, the real challenge is in the detail, where cost containment, compliance, and operational efficiency will make or break the growth profitability model.
Let’s look at the ‘details’ challenge, with some infrastructure basics. Cutter Associates polled investment managers about their infrastructure. “Almost half of the firms surveyed use more than one IBOR,” they found. “60% of firms update their IBOR with start of day or end of day positions, with just 40% updating their IBOR intraday as events occur.”
I’m guessing that this is symptomatic of a few conditions:
- A consolidated investment book is unavailable due to the multiplicity of IBOR systems supporting the business;
- Management reporting systems, presumably fed by IBOR systems, are legacy-laden with updates taking several hours, thus scheduled for overnight processing;
- Electronic connections to counterparties, including executing brokers and custodians, are not enabled – or not dynamic.
The picture that emerges is a multiplicity of systems connected and supported by a network of people. Expensive. And difficult. Think of the SEC walking into your office and asking for transactions for multiple accounts, across distribution channels, in a specific format. Now imagine having to fulfill that request from multiple IBOR systems!
The concept of having multiple accounting platforms is not foreign to most in the business – particularly multi-channel investment firms. Many investment management firms started in the institutional/mutual fund space and had an accounting platform that worked to service that business line. Firms then expanded that infrastructure to feed other technology tools such as OMS, CRM and other 3rd party applications.
Then enter the managed accounts business, which brings the same general structure of institutional accounts, but dramatically increased volume. The institutional infrastructure may not have been set up to successfully manage a high volume business channel – hence the multiple accounting engines. And, most likely, channel-specific operations support.
Sound familiar? Looking through the lens of successful growth initiatives for which profitability is driven by cost containment, compliance, and operational efficiency, successfully growing investment firms have taken a hard look at non-core activities associated with IBOR support. Ideally, a single accounting engine with an IBOR platform to support all business lines, and a functionally streamlined operations infrastructure are implemented. The implementation plan is considerate of business interruption impacts, cultural fit and a client-centric view of the investment manager’s roles and responsibilities. In short, profitable growth requires a detailed definition of ‘What’s non-core?’ and a willingness to apply technology and operations solutions to enable investment management efficiency and effectiveness. And growth.
Let’s go back to consultants for a moment. A multi-channel investment manager paid mightily for an infrastructure analysis as part of the manager’s positioning-for-growth initiative. The consulting firm identified the following systems within the manager’s infrastructure:
Credit and risk analytics • Portfolio construction and analytics • Trade generation, order management, routing, execution, and allocation • Pre- and post-trade compliance • Data management • Confirmation and settlement processing • Performance measurement and attribution.
Seven key infrastructure pieces. The consultant’s solution?
Implement a hosted portfolio management solution or a best-of-breed vendor solution centered on a trade order management system (OMS)… understand the basic strengths, weaknesses, and trade-offs of each one… identify functionality gaps in greater detail…[conduct an] “all-in cost analysis” including implementation and integration costs, support costs, and potential costs of additional best-of-breed solutions and data.
In other words, they recommended a single-platform, multi-channel, multi-currency tool, with efficient operations support for select aspects of the business. They recommended Archer.
I’ve worked with many investment management firms in positioning for growth. No consulting fees, just a viable solution that happens to be offered by a firm that’s successfully growing…along with its clients.
Bryan J. Dori
Bryan Dori, President and CEO of Archer, has guided the company to become an industry leader in operations, technology, and client service. Having spent his career building solutions that streamline every stage of the investment lifecycle, he has transformed Archer’s business by expanding the firm’s scope of services to help managers meet demand for increased customization. Under Bryan’s leadership, Archer was named 2020 winner of the WatersTechnology Best Outsourcing Provider to the Buy Side award and one of the Inc. 5000 fastest-growing private companies in the U.S. In 2021, Archer’s former private equity investor, NewSpring Capital, inducted Bryan into its CEO Hall of Fame. He is often quoted in the news media on financial trends and regularly blogs on Archer’s website.
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