Investment Manager Operations Profit from New Automation Tools

Straight-through processing – the nirvana of seamless, automated, end-to-end transaction flows – has been a goal for the financial services industry for decades. Achieving it remains elusive.

But a new breed of technology tools is bringing us closer.

Which is good news for an investment management sector wrestling with unprecedented cost and margin pressures.

Investment Manager Operations Weigh on the Bottom Line

The rise of passive investing, and growing competition from existing providers and new market entrants (including the emerging band of robo-advisors) continues to squeeze the fee models of participants across the sector, from wealth managers to hedge funds and traditional asset managers.

But firms’ costs have not fallen in line. Instead, much of the industry is weighed down by huge middle- and back-office operational infrastructures, as investment advisors and managers struggle to support:

• An ever-growing global regulatory compliance burden.
• Increasing client demands for more tailored, sophisticated and responsive digital services at all points in the customer journey, from initial contact through to client onboarding and ongoing account maintenance.
• Geographic expansion to take advantage of investment opportunities and attract clients in new markets, increasing the need for more follow-the-sun, 24/7 trading and client servicing capabilities.
• A broad-based shift towards more complex investment vehicles and strategies, as managers try to boost returns and differentiate their performance.

Automation Is the Ultimate Solution for Wealth and Asset Managers

So how can wealth and investment managers meet these demands, while improving their cost-income ratios and future competitiveness?

Experience shows there are two main ways:

• Enhance the firm's internal operating efficiencies.
• Outsource to a more efficient third-party provider.

Both – whether the middle- and back-office tasks are conducted internally, or by an outsourcing specialist – require high levels of automation. Achieving it though is easier said than done.

Robots in the Back Office: Benefits to Investment Managers

At Empaxis, we’ve worked for years to automate every process we can (while maintaining the human-ness needed to properly serve investment advisories).

However, despite industry efforts to automate the different data flows, so many companies continue to lag behind that it still requires extensive human effort to translate those data points and move them to where they need to be.

Reconciliation is a particular problem area. An investment manager may work with 50 banks and custodians, with each sending their account statements in different formats, at different times and using different methods. Traditionally, the simplest way to compare the banks’ statement data against an investment manager’s portfolio accounting system output has been with the human eye. But that is neither time nor cost efficient, or scalable.

Which is why industry participants like us are adopting tools such as Robotic Process Automation (RPA) – and its AI-enabled sibling, intelligent process automation (IPA) – to help. Automating these often laborious and repetitive tasks will:

• Speed up processing times.
• Improve data accuracy.
• Reduce operational risk.
• Free staff to monitor (rather than carry out) the processes.
• Allow them to focus on higher-value analytical and technical tasks.

And as the technology becomes more sophisticated, the RPA and IPA use cases are growing all the time – including AML and KYC checks, trade exception handling, reporting and corporate actions processing.

APIs Foster Seamless Financial Servicing System Communication

Another area delivering automation strides is greater API usage, to allow systems to interface and integrate, and data to flow more smoothly.

For example, a large custodial data provider our clients use pushes its data out to users at random times in an eight-hour nightly window. Previously, our team had to manually check when the relevant files became available. But by leveraging the provider’s API, we can now access status updates that enable us to send triggers to launch different processes at the moment the data arrives.

The emergence of increasingly intelligent tools such as these has the power to transform firms’ operational environments. The industry leaders of tomorrow will be those organizations that embrace the technology advances today.