By Liqueo U.S. Practice Lead, Phil Marchwinski.
The Asset & Wealth Management industry is facing significant pressure to generate alpha (or excess returns) for its investors as compared to the benchmark and other competitors. Many of these opportunities present themselves through differentiating operating models, expanding asset class coverage, launching new products or business units, or improving technical debt and straight through processing.
The ‘pressure’ to seize these opportunities can have a significant impact across the firm - with a concentrated dependency on technology and business processes.
Although firms need to be equipped and ready to act on these alpha-generating opportunities, are all opportunities worth pursuing? What are the impacts and costs associated with these decisions?
When evaluating solutions to meet the above needs, asset managers will typically look to existing technology and business processes to see if any can be leveraged. This approach is always preferred because it can mitigate risk and save time and costs.
However, each manager has their own unique set of internal policies, processes, and infrastructure - that make it difficult to always leverage existing technology and processes when pursuing alpha generating opportunities. When this is the case, managers have a few options:
Provide solutions that meet business demands and conform to standards set within technology solutions and operational processes defined by the firm. Benefits of choosing to standardise include a reduction of implementation time and costs, reduction in training and support costs, and scalability for subsequent business needs and technical maintenance such as upgrades. Drawbacks of standardisation include the ability to comprehensively meet 100% of business needs, along with an increased dependency on product development to alleviate workarounds.
Provide tailored solutions that meet those business demands which fall outside the existing standards set within technology solutions and operational processes, as defined by the firm. Benefits of choosing to customise include the ability to meet 100% of business needs, flexibility to control product solutions and roadmap, and retaining intellectual property internally. Drawbacks of customisation include an increase in implementation time and costs, key staff risk, along with increases in time and costs for subsequent business needs and product maintenance (i.e. upgrades, technical debt).
It is important that firms lean on their strong leadership when determining whether to pursue an opportunity and which type of solution to move forward with (standardisation vs. customisation). Often, utilising a steering committee approach to facilitate the decision-making process can ensure these decisions and corresponding impacts are in line with the firm’s overall strategy and operating model.
Liqueo partners with Asset & Wealth Managers to provide our domain expertise in the Technology & Operations onboarding process. We help with all analysis, design, implementation, and support phases of the process. Please reach out for more information.
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