Ever since the beginning of the financial crisis the investment fund industry has been plunged into a period of intense regulatory remodeling that has created a sea of change for asset managers.
Firms have been busy plugging the holes of their data management processes to comply with the ever growing number of data points they have to report to the regulators. But although reacting fast is key to ensure compliance, quick fixes have limited results over the long term.
While there is no doubt that the multiple changes in the regulatory landscape have brought greater stability in the market, they have also contributed to the fragmentation of the asset manager back-office, and had important repercussions in the data sourcing and aggregation that is required to comply with multiple regulations.
Many firms are dealing with too many vendors, each providing a single-point solution, and multiple third-party applications that solve similar needs, often at a high cost and with detrimental impacts on operational efficiency. Most often, these point solutions are limited in their ability to reuse existing data from other systems.
Our most recent Confluence survey, conducted in the fall of 2014, found that 78 percent of respondents use multiple third-party solutions to support their back-office operations.
Asset managers are realizing that continuous and increasing transparency demands are here to stay, and as the industry continues to refine its response to regulatory mandates, they need to rethink their business models and transform their operations and strategic data management practices.
This is the time to take advantage of the slight slowdown in regulatory demands, and start addressing the undesirable operational side effects of complying with that first wave of regulations. This will not only improve efficiency in the long run, but it will also prepare asset managers for the next round.
While the opportunity is here, asset managers need to take a step back from problem-solving for the immediate regulatory demand and start thinking more holistically about their data management strategy. A more efficient back-office operating model could help improve operational efficiency (76%), streamline the reporting process (55%) and reduce operational costs (48%), according to the respondents of the same survey.
Firms have to act soon if they don’t want to pay the long-term price for thinking in terms of the next quick fix. Managers need to find partners of choice who can provide a much broader set of technology to help them solve more than one problem at a time. Those partners should also be able to easily fit within the manager’s enterprise-wide data management strategy.
Developing a golden or master copy of fund data that can be validated once and reused for multiple regulatory or investor reports will drastically increase operational efficiency, especially for those who have to report to regulators across multiple jurisdictions.
The journey toward a more consolidated technology and data strategy should start now. Reducing the number of vendors asset managers work with is a start. The forward-looking firms will begin to move away from short-term tactical solutions and adopt a more holistic, long-term view of data management across the enterprise to improve efficiency and reduce risk.
As Melvin Jayawardana said in a blog post back in January, wise long-term decisions are essential to ensure businesses are operating effectively. The industry needs to adapt to this tidal wave of regulation, and accumulating multiple, small vendor applications, disparate data solutions, and manual processes can no longer be the norm.