Insurance companies, asset managers and pension funds face increasing pressure to diversify their investments in order to meet growth targets. At the same time, they are being asked to simplify their operating models to improve efficiency, reduce cost, increase revenues and reduce risk while also complying with various regulatory regimes in which they operate. How are firms meeting these seemingly irreconcilable challenges, given that some are operating on legacy systems and infrastructure that are simply not built for the conditions we see today?
The problems with legacy systems include an inability to manage increasingly diverse and complex investment portfolios, quickly meet changing client, market and regulatory demands, automate manual and repetitive processes, and interface and reconcile data between multiple disparate systems for consolidated reporting and risk management purposes. We frequently talk with firms about the above-mentioned challenges and potential solutions, and we typically find these firms falling into one of the following three situations:
- The firm undertakes a full system upgrade and modernization project to include solutions that cover back-to-front office needs.
- The firm chooses to outsource/co-source operations to service providers who have modern systems and expertise.
- The firm feels that implementing manual workarounds or acquiring patchwork systems that give them more time on existing infrastructures is the best short-term option.
Category 1 – System upgrade and modernization
A full infrastructure or system overhaul usually requires sponsorship from senior leadership teams who recognize the need to change and who can build a business case for the funding to evaluate solutions and make the change. Common reasons that leaders determine they are ready to make a change include:
- Numerous inefficiencies and inaccuracies that result from manual processes
- Inability to trade certain asset classes (reduced revenue)
- A change in leadership
- Data issues across the firm in terms of accuracy, completeness and timeliness
- Lack of automation
- Complexity that has emerged over time through disparate systems and workarounds
- A major incident that cost the firm significant funds or exposed them to unacceptable risk
Once a decision to modernize infrastructure is finalized, next steps are about researching solutions in the market that can future-proof the investment manager for the next 15 to 20 years. No one wants to be changing systems every five years.
What should a firm look for at this stage? At the highest level, they should start with real-time or near real-time back-to-front office integration, straight-through processing and automation. Investment managers want their Accounting Book of Record (ABOR) to be in sync with their Investment Book of Record (IBOR). Look for solutions that embed Artificial Intelligence (AI), Machine Learning (ML) and Robotics Process Automation (RPA) technologies to automate manual functions that don’t add any real value to the investment decision-making process. The automation and straight-through processing in a single system will help reduce manual errors and help the IBOR be in sync with the ABOR.
Reduce Total Cost of Ownership (TCO) by acquiring a cloud-based system, so the expense of the infrastructure is taken care of by the vendor. Finally, look for a consolidated system with accounting, operations, risk, compliance and performance in a single system to reduce the need for reconciling data.
Category 2 – Outsource or co-source non-core functions
Outsourcing or co-sourcing is another option for investment managers feeling the pain of legacy systems and processes. With this option, an investment manager can, with relative ease, move problematic functions to an experienced partner. The partner/outsourcer can take over all or some of the non-differentiating aspects of an investment manager, leaving them with more time and resources to focus on their core competency—solid investment decisions.
Look for a vendor that is using the most current, modern systems. Also, look for someone who can provide you with a view into their process and provide real-time information so you can see the data in real-time. Transparency through a shared Graphical User Interface (GUI) will give the client a real-time view into the system that the outsourcing or co-sourcing partner is working in so the client and the vendor have a single view into the system.
Category 3 – Manual Processing or Patchwork Solutions
This is not our recommended solution, but for firms with extremely complex infrastructure, years of acquisitions and multiple back and middle-office systems—they have considered an IBOR to stitch the systems together. These projects can prove to be extremely expensive and time-consuming to maintain and service over the long haul, and it is unclear whether they have provided the Return on Investment (ROI) envisioned by leadership teams. Firms should consider the ROI and business case for a modern system that will future-proof their systems before embarking on a patchwork of systems. Several consulting agencies and vendors can help with this exercise, including SS&C.
The last few years have seen meaningful advances in how asset owners and asset managers tackle the complex issue of managing assets and streamlining processes from the back office to front office, and now may be a good time to consider modernization. Advances in technology have made implementations quicker and have provided a faster ROI, as cost savings can be realized with the automation provided by AI, RPA, ML while reducing the TCO with cloud-native sophisticated technology delivered securely. The COVID-19 pandemic has also emphasized the need for availability of systems anywhere and deployed legacy systems are not an option anymore. A cloud-native modern SaaS platform allows employees to work from home with systems built for accessibility from anywhere with the performance needs of the remote workforce versus legacy alternatives.
Singularity is SS&C’s next-generation, integrated investment analytics, operations and multi-basis/multi-currency accounting platform. The cloud-based, web and mobile accessible platform incorporates the latest AI technologies, advanced risk and performance analytics while leveraging SS&C’s global technology infrastructure and 35 years of operational, fund administration and accounting expertise. The result is a powerful user interface that provides real-time, comprehensive customizable data views and analytical insights across the investment spectrum, solving many—if not all—of the problems that legacy systems and outdated infrastructures perpetuate. SS&C brings together robust accounting, highly-automated operational processing and analysis for all asset types in a single, unified solution and common user interface, and offers clients the most flexible deployment options in the industry—including SaaS, Full Outsourcing, or Co-Sourcing. To learn more about SS&C Singularity, contact us.
Alternative Investments, Insurance, Risk Management