Infrastructure

06:28 PM
Connect Directly
LinkedIn
RSS
E-Mail
50%
50%

What Will the Financial Back Office of Tomorrow Look Like?

Asset managers are increasingly looking to automate their manual back office workflows. Confluence calls it the "back office revolution."

One of the toughest jobs we face as a technology solutions provider is predicting future needs of the industry as it evolves and becomes more technologically sophisticated. The fund industry back office of tomorrow will rely on a far greater degree of workflow automation on par with the level of automation we see in the front office today. The asset management industry is increasingly looking to leverage systems that automate workflows that have been traditionally handled manually – something that will undoubtedly trigger a wave of innovation and revolutionize the back office as we know it.

Two driving factors are behind this change. First is the increased scrutiny fund managers are under and the resulting need to ensure both investors and regulators have a high degree of data integrity and accessibility in the back office. Administrators and asset managers will need to bring their A-games to the table if they are serious about addressing the lack of automation in the industry. We predict more scrutiny in the fund expense side of the business in the future, with automation playing a key role in managers being able ensure that data is readily accessible and expenses are distributed accurately and fairly across share classes.

The second, and longer-term, factor is a desire to achieve some of the operational efficiencies in the back office that fund managers have achieved in the front office through the use of sophisticated technology. Automation plays a large role in this. For instance, the ability to leverage a living document concept will help managers save time and resources while helping them ensure their fact sheets, KIIDs, prospectuses and financial statements are aligned and fit for purpose before they are distributed globally.

This "back office revolution" won't happen, though, without an investment in this long-overlooked area of the fund industry. These strides forward will be especially necessary in light of recent and impending regulations. I cannot stress enough the importance of investing in a regulatory data platform that will help mitigate the cumulative cost of regulation. There is a need to invest in solutions now: The business and revenue opportunity that the era of “big data” promises will not be realized without a deliberate and diligent management strategy to turn tactical solutions into more long-term strategic, data-driven initiatives.

It seems the common view among fund managers is that the return on investments that make the back office operate more efficiently will be felt in two ways: operational costs coming down over time, and new opportunities to win capital allocation by being able to demonstrate to investors a smarter, more robust operating model. That second benefit could contribute meaningfully to fund growth in the new market environment, but it will be difficult to achieve this win if fund managers don't embrace the potential that operational automation promises.

Melvin Jayawardana is the European Market Manager for Confluence, the leading provider of automated data management solutions for the investment management industry, including the Unity NXY AIFMD Transparency Reporting solution. He directs the global expansion of Confluence's ... View Full Bio
Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Melvin Jayawardana
50%
50%
Melvin Jayawardana,
User Rank: Author
8/13/2014 | 1:53:13 PM
Re: Scrutiny on the Expense
Greg / Ivy, Thank you. Yes the Asset Management industry's focus has long been on exploring ways to optimize and differentiate their offering in the market. For many years this was achieved through heavy investment in the front office to help spearhead expansion and asset gathering activities. The tide is now turning, and with heightened investor scrutiny and additional regulatory “shots across the bow,” managers are beginning to rethink their back-office investment strategy. New regulations, the push for a more efficient global operating model and increased investor demand for more customized transparency reporting will drive this process over the next few years. For example, transparency around fund and manager expenses will be a key focus for investors and regulators in the months and years ahead. To properly address this, managers will need to invest in technology that can manage and fairly allocate charges across multiple share classes. I believe that we will see a push in the industry to further embrace technology as the markets look to buck the trend and head North!
Greg MacSweeney
50%
50%
Greg MacSweeney,
User Rank: Author
8/4/2014 | 8:21:00 AM
back office focus?
After years of neglect, I've heard that many asset managers are looking to make their back office processes more efficient. That makes sense. After all, the front office has received most of the heavy investment for the past decade (or longer).
IvySchmerken
50%
50%
IvySchmerken,
User Rank: Author
8/1/2014 | 12:45:49 PM
Scrutiny on the Expense
Melvin, its interesting that regulatory pressure on the expense side for asset managers might drive them to invest in more workflow automation in the back office. The back office  has been a step child to the front when it's come to investing in technology. Asset managers are not that transparent when it comes to fees. if there is any regulatory push into investigating this area, perhaps firms will upgrade their backoffices in preparation for delivering data.
More Commentary
SEC Examinations: What to Expect When the SEC Is on It's Way
Theodore Eichenlaub highlights trends in SEC expectations and how to approach a risk assessment of your compliance program.
The Value of Predictive Analytics in Financial Services
Risk management and customer data are two key areas where data analytics is being applied in financial services.
Moving the Trader Closer to the Investment Process
The sell side can demonstrate more value by applying analytics to pre- and post-trading, and by educating buy-side clients about broker segmentation, trading behavior and algorithm shortcomings, and more.
Wirehouses May See More Independent BDs as Retention Packages Expire
Retention bonuses are expiring, leaving brokerages vulnerable to attrition. Is access to technology making it easier for brokers to go independent?
SCI: A Whale of a Regulation
The SEC's Reg SCI weights in at a whopping 742 pages. Here is what you need to know about the oversized regulation.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
7 Unusual Behaviors That Indicate Security Breaches
7 Unusual Behaviors That Indicate Security Breaches
Breaches create outliers. Identifying anomalous activity can help keep firms in compliance and out of the headlines.