I’ve long been an avid reader of The Boston Globe sports page dating back to the days of Ryan, Gammons, McDonough, MacMullan and several others that have graced the Boston sports journalism scene. There aren’t many must-read columnists left unfortunately, but I’m still drawn to their coverage, albeit in the online editions (via my Twitter feed, of course).
The last star columnist of the Globe is Dan Shaughnessy, who is equally revered and reviled in these parts, as he is not afraid to take a controversial stand and call things as he sees them. On occasion, he writes his “picked-up pieces” column in which he essentially takes a stream of consciousness “lightning-round” approach to all things sports. So I’ve chosen to channel Mr. Shaughnessy with this blog post, as I attempt to capture my views and opinions on the state of the asset management industry (or at least our place in it)…
Here’s my own “picked-up pieces” and leftover thoughts while catching my breath after a few busy weeks on the buy-side conference circuit.
- Legacy technology, while still very much a problem in our industry, has met its match with legacy behavior and legacy process with regards to impeding progress. It's quite simple: there is a wide collection of people that are impervious to change in all walks of life, and the asset management industry is no different. Selecting and implementing a "shiny new toy" to fit into your technology stack will do little to advance your business or operation if you choose to mimic the same processes and workarounds mandated by your legacy technology platform. Hearing the words "like for like" or "Day 2" are fingernails on a chalkboard for me. These are the legacy behaviors that are holding us back; disrupting legacy cultures that have been performing the same functions the same way on a daily basis for the past 10-15-20 years is a hurdle that must be overcome to make true strides.
- Some vendors, which will remain nameless, have become very thin-skinned in this competitive world of ours. Citisoft is hired by asset management firms to advise them on everything from crafting a go-forward 3-5 year IT and Operations strategy to future state operating model design to selecting systems and solutions that typically replace legacy “problems” (see above). We call our changing industry the way we see it, and introduce solutions to our clients that make sense in the long-term. We pay very close attention to the vendor and service provider community for a reason; we know which vendors are investing back into their products, and which are not. We study the health and vitality of the various providers, and differentiate the leaders from the laggards, and in turn, pass that information along to our clients.
- Staying with the vendor theme, there is an M&A arms race going on when it comes to the modus operandi specific to asset management technology platforms and data integration. On the one end, you've got the vendors that are approaching the industry with a nearly holistic approach towards handling everything from order management and analytics to client reporting and fund accounting; I say "nearly" as I don't believe that a single vendor can do it all, given the product proliferation and global regulatory and distribution challenges prevalent in our business. At the other end of the spectrum, you've got the "best of breed" players that prefer to "skate in their lane"; they know what they do well, they invest in that discipline, and declare themselves the best within a specific functional area. Citisoft doesn't pick sides in this fight (sorry to disappoint), as depending on our clients' needs, this is not a one size fits all answer.
- If I had a dime (or is it a nickel?) every time a client or prospect thumbed their nose at performing a comprehensive (or even a cursory) current state assessment at the outset of a project.... well, I might not be rich, but I think you get the idea. You can't get where you need to go if you don't know where you've been. Spending the 3-4 weeks (estimates will vary of course, based on scope) to properly understand current-state process flows, make observations, document pain points, etc., is a very small price to pay to pave the way for an enlightened future state model.
- Another pet peeve—why the shock and dismay within complex, global asset management organizations when the word "recalibration" creeps into their vernacular midway through a transformational program of change? Show me a program of any size in our industry in the past decade that didn't hit a speed-bump or three. I would like to think that we advise our clients to be ready to re-plan at any point; "stuff" happens over the course of a multi-year program, and flexibility is key. It takes a strong person or organization to admit that their plan was flawed or didn't account for a dependency, regulation or other factor; protecting your turf and not looking in the mirror and fixing the issue is a recipe for pain. Not necessarily disaster, but certainly pain.
- Disruptive technology, digital transformation and the fintech revolution are all getting a lot of play across the industry, including several posts coming out of the Citisoft thought leadership engine. These topics are seemingly ubiquitous, as they've been top of mind at every stop I've made over the past several months; whether it's a vendor conference, industry gathering, client visit or media discussion, the conversation either starts with tech disruption or finds its way there before too long. I admittedly go back and forth on this. There are times where I'm "all in" and feel that we may be on the cusp of some potentially transformative change, whether it's through the adoption of machine/deep learning, robotics, predictive analytics and blockchain. At other times, I'm not sure if our industry feels a bit left out of the tech disruption craze and are simply hopping on the bandwagon in the hopes that fintech can capture the buzz that transformed so many other industries. Going "digital," streamlining back-office trade settlement with blockchain, utilizing predictive analytics in the front office and introducing "bots" to eliminate manual errors in the reconciliation process are all good steps, but are they truly disruptive? For disruption to truly take hold, business models need to be transformed and legacy behaviors will need to change, in a similar fashion to what has occurred in music, hotels, taxis, TV, newspapers and the list goes on. Only time will tell whether the massive investments being made in our industry deliver an ROI that justifies the hype.
I’ll stop here, but there are several other topics that could and likely should have been included in this laundry list. The active vs. passive debate continues to rage on; regulatory concern isn’t going away; multi-asset, multi-strategy portfolios are here to stay to stay; vendors are racing to the cloud; and asset owners of various stripes are taking more control of the portfolio management function. As always, I’m happy to debate and discuss any and all of these views. What are you seeing out there?
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