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.
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:
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:
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.
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:
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.
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.