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the industry were to all use one service
provider for a front-to-back offering, that
it would “stifle innovation”.
“There are clients who prefer to use a
range of providers for different reasons,
for example, risk or geography. While we
look to provide comprehensive solutions
for all an investment manager’s needs, we
want to ensure it is a solution that we ex-
cel at. With the multitude of stakeholders,
the investment manager may need diverse
solutions,” adds BNY Mellon’s Turner.
As more functions across the asset man-
agement business becomes outsourced,
this poses the challenge of what to do
with those staff that had carried out those
functions. For example, Dutch asset man-
ager Robeco said it would have to make
70 redundancies across its operations and
administration teams after it decided to
outsource to JP Morgan.
Yet this is also leading to the creation
of new governance roles within those
companies who will be responsible for
overseeing and ensuring the functions
carried out by their outsourcing provider
are accurate and efficient.
New governance roles
It may not be a case of converting people
who worked on operational functions to
become third-party overseers, but instead
they can hire individuals that are spe-
cialists in overseeing relationships, and
product management oversight. This is
crucial for the accuracy and timeliness of
the data as ultimately the buck stops with
the manager.
“We have had to deliver a regulatory
oversight model where we would carry
they will have to think about what role technology will play.
“There is a heavy bias towards technology for new operating
models,” explains Turner.
“Managers’ operations team will be less-focused on processing
functions and more on exception-based roles and on engage-
ment with their stakeholders. Technology will help reduce
duplication in the investment life cycle and help optimise opera-
tions in order to bring about meaningful change.”
JP Morgan’s Doherty agrees, in that many of their clients will
have to look at a new way to make sure they have an operating
model that balances technological upgrades with outsourcing.
Senior buy-side panellists explained at a recent industry con-
ference that a shared solution, provided by a vendor, that can
utilise APIs and cloud-based technology will resonate heavily
with buy-side operating models.
“An infrastructure based on flexible architecture with the con-
cept of an app store that is integrated in a common data platform
will appeal very much to the buy-side,” said Geoff Galbraith, COO
of MAN Group, one of the world’s largest hedge fund managers.
Plug and play
Fabio Tramontano, executive director for Goldman Sachs Asset
Management, who also took part on the panel, agreed that the
buy-side need a platform that can provide the underlying engine
and data that can be plugged into many different operational
segments.
“The requirement to uplift every single system is something
that is a huge resource drain from a time and operation team
perspective. There is a huge need for a common platform and a
common utility,” said Tramontano.
According to Northern Trust’s Biggs, work is being done to allow
their clients to plug into a technology platform that can connect to
all of their systems and provide that one end-to-end view.
“We are launching a technology platform and an operating
model that is designed together as one. This architecture matrix
is a whole new operating model enabling us to connect to all
systems we may need to plug in and provides us with a data fab-
ric that sits in the middle, taking us to a new level of efficiency,”
adds Biggs.
“You need the best possible core to deliver faster and achieve
“You need the best possible core in order deliver faster and achieve scale, connecting to every
underlying system in order to provide optionality for the client.”
PENELOPE BIGGS, CHIEF STRATEGY OFFICER, NORTHERN TRUST
out the compliance work and deliver best
execution and analytics, but at the end of
the day they are on the line to make sure
it is all correct,” explains Biggs.
With all these changes towards out-
sourcing and operating models, asset
managers will have to think carefully
about how this ties in with their overall
technology stack. Managing the challenge
of legacy technology is difficult for both
the client and custodian.
As decisions over full outsourcing or par-
tial outsourcing take a greater importance,
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Global Custodian
Fall 2018
scale, connecting to every underlying system in order to provide
optionality for the client.”
It is evident now more than ever that the changes occurring at
the client-level are having far-reaching effects on every player in
the financial services industry. The evolution of buying behav-
iour for investors, coupled with heightened regulatory require-
ments, and the need to achieve efficiency have all sparked an
industry-wide shift in operating models.
Like the wings of a butterfly, the changes at one level are
rippling throughout the value chain, and outsourcing providers
will have to put forward an offering that caters to these changes,
as well as a technology solution that brings the data all the way
back to the end-client.