One of the biggest threats that most Portfolio Managers face is the prevalence of legacy systems.
the past three decades, investment advisors have been empowered by the
advent of technology from simple spreadsheets to complex home-grown
systems. From that time to the present, the industry has seen
exponential growth and with it, enormous complexity. Challenges include
round-the-clock trading in markets from New York to Sydney, varying
accounting standards, shortened settlement cycles, and of course,
increased regulation and security issues to name a few. As if that were
not enough, technology seems to change every day leaving many legacy
systems struggling to keep up with customer demands. Cheaper, faster,
smarter, and more efficient norms are expected – they cannot be the
exception. Failing systems can sharply undermine your company’s ability
to service its customers and maintain its market share, much less grow
In this age of big data, business intelligence, and
data analytics, legacy systems can represent a massive risk to your
business. If day-to-day operations require the ability to manage
process, distribute, and accurately report financial data, being behind
the curve is not an option. If this sounds familiar, it is time to ask,
“How did we get here?” and more importantly “How do we get out?”
Here are the seven signs that will tell you if you have a decaying system and how it must ideally operate:
1. Facing difficulties while managing data due to disparate systems?
data in different systems or manually moving move data from one system
to another will lead to inconsistency and errors. Is your data quickly
identifiable, consistent across multiple systems, complete, accurate,
and reconciled among different systems? If your answer is a NO to these
questions, you must reevaluate your platform. Your system must be able
to eliminate manual data flow, update all the data with a single change,
deliver timely and accurate reporting including intra-day, and make
data easily traceable.
2. Are your client communications professional?
expect your reporting to be clear, concise, and highly customized to
their needs. This statement holds especially true for institutional
investors. Organizations that can meet these expectations will have an
immense competitive advantage over those that cannot. If your current
system does not deliver the level of reporting your clients expect, you
will run the risk of falling behind.
Your client expectations are
not limited to the form and content of reporting, but also to how you
deliver information. They expect instant access to real-time
information, be it through a web portal or a mobile platform to stay
relevant and highly competitive, your systems must be flexible enough to
send and receive communications via any channel of your client’s
3. Struggling to cope with complex global investments?
with multiple regional and global investment regulations such as UCITS V
and VI, Solvency II, AIFMD, and EMIR is a daunting task. All these
regulations require you to maintain reliable, accurate, and transparent
data. To comply with these regulations, you need Workflow Management,
Data Management, and accurate reporting. Data, managing risk, and
maintaining accuracy is critical to comply with regulatory reporting
With the increase in data sources and data
complexities, your organizations need solution providers who can help
you manage your data. Your system must not only be scalable but also
provide actionable business intelligence in a format that is easily
4. Finding it hard to achieve Integration of disparate systems?
integration is not a matter of simply connecting systems – your systems
must be able to talk to each other seamlessly. Manually moving data
from one system to another affects your efficiency, thereby, increasing
the risk of errors. Integrating disparate systems not only reduces these
risks but also improves efficiency by ensuring that back office and
front office personnel can view transactions, cash positions, and
holdings identically. This ensures that the entries are recorded
accurately in your Investment Book of Records (IBOR).
organizations use multiple systems for accounting, reporting,
reconciliation and managing client information. If different vendors
have provided these systems, making them talk to each other could be a
challenging process. If you have workarounds or portfolios that reside
outside of your legacy system, it is time to rethink its usability. Your
system must allow centralized and standardized portfolio management
activity. In an end-to-end portfolio management solution that is built
on open architecture, the work of multiple systems is consolidated into a
single platform. Such a solution will allow easy access to third-party
systems or any other system that is built in-house, thereby enabling you
to reduce technology footprint while driving greater efficiency.
5. Escalating legal and compliance costs?
2013 survey of Chief Technology Officers suggests that one of the
biggest operations and technology challenges that asset managers face is
to comply with the current and future regulatory requirements. The
complex regulations make outdated reporting systems more of a liability
than an asset. The compliance costs of regulations such as AIFMD, UCITS
V, and VI, or FATCA-are overtaking many budgets. Additionally,
aggregating data from different systems for compliance reporting is a
risky and resource-consuming process. To reduce these risks and costs
simultaneously, your system must be prepared to deliver consolidated
reporting, by leveraging automation, integration, and standardization of
data from various sources. Your systems must also eliminate the manual
compilation of data for reporting, thereby increasing efficiency and
cutting associated compliance labor costs while ensuring integrity,
consistency, and reducing your operating risk.
6. Being scrutinized by Investors’ due diligence?
surviving the global economic crisis of 2008, institutional investors
have become extremely wary of due diligence, leading to immense scrutiny
of operations. The 2008 crisis exposed operational risks – the risk of
failure that not only involved market forces but also the lack of
infrastructure and controls. Investors have also become increasingly
tech-savvy; they are asking the right questions and know what to find.
To remain competitive in this vital market, your system must stand up to
the intense investor scrutiny. You must show that you have the controls
in place to manage the risks efficiently and that you are already
adhering to well-organized processes. If Investors sense any gaps in
your workflow and find that you are dependent on manual processes and
workarounds, they will take their money elsewhere.
7. Legacy systems are not supported, serviced, or enhanced in the way you expect?
product is only as good as its provider. Is you provider paying enough
attention to you after the sale with 24/7 support? Does your provider
have a track record of continuous product updates? Do they provide
product training? Are they attentive to your suggestions or new ideas?
Your provider must provide long-term support if you want your new system
to last. Your product must be scalable, flexible, and must be built on
open source technologies. In addition, your provider must not only help
you set up but also ensure that your systems perform optimally without
any disruptions. A relationship is a two-way street; as such, providers
must be able to respond to your issues quickly, and also help your
business adopt new functionality as and when it is needed.
Invest in your growth
portfolio management system is the heart of your business. With a weak
system, your business can be at serious risk, and you may not have the
time to address it before it fails completely. Investing in technology
will give you greater efficiency, reduced risks, and help you make
informed decisions. Your provider, therefore, must have a proven track
record of being committed to long-standing services, continuous
improvement, and support you as you grow.