As the investment management industry faces growing budgetary constraints and new complex regulatory mandates, relying on internal and external data is now pivotal to maintain or gain a competitive advantage in the market.
At a time when the Fed is hesitant to raise interest rates, market conditions are forcing outflows from investment funds and regulators are pushing tighter reporting and transparency standards, it’s critical to invest in data technology and ensure your data approach is comprehensive to meet the new demands of this complex environment. Traditionally organizations have been focused on the effective use of data but to maintain an edge, organizations are moving toward transforming their data into an asset for the enterprise.
Indeed, the senior executives of investment management and insurance firms that I work with and speak to are grappling with significant headwinds and operational challenges that are increasingly disrupting their business models and restraining their profit margins. That’s driving them (as well as firms around the world) to rethink how they leverage their data across different business functions.
Historically, asset managers have managed and analyzed their data in silos, focusing on the infrastructure around that data for one particular function in isolation. Today, managers are realizing they need to connect their data from one function to another (i.e., viewing it as a single entity). A “single version of truth” approach to data will unify employees from the front office to the back office, fostering greater collaboration and empowering more informed decisions from both a business and technology perspective.
When you look at data through this lens, you are able to link data to multiple areas within your organization, enabling you to mitigate the challenges and risks presented in the market. For instance, a single data vision can generate greater insight into the instrument you need to invest in to enable higher alpha or a new product that will meet the evolving and specific needs of clients. Once these connections are made, organizations can start leveraging data and the analytics for improved investment decision making, product innovation and efficient reporting
From a broader perspective, data is at the center of digital transformation and customer experience. It requires integrating data both architecturally and visually to enable digital enhancements like on-demand services or automated operational solutions that can drive higher quality data and transparency within the organization and for the customer
Further, your data vision must extend both domestically and globally. It should not only fit into your home office but extend to offices around the world as well as with the legacy systems and processes that you will potentially inherit through acquisitions.
Some key questions to consider as you work through the data transformation journey:
- How does data relate to your core functions (e.g., accounting) and also interact with your internal users such as portfolio managers and traders and external users like advisors, distribution channels and clients?
- How do you align the entire organization to the same definition of data from a variety of perspectives?
- How do you produce a single version of truth and create automation around it to realize the associated cost benefits?
Ultimately, building an organization that lays data as the foundation of the entire digital transformation initiative is contingent upon the governance structure, business and technical architecture and data visualization tools you employ to bring it all together.
As an industry, we typically reflect on change as something in the past. However, I believe we’re currently in the midst of a significant change. If asset managers don’t respond with a centralized data approach, they risk the opportunity to reduce operational risk and reliance on manual processes, improve accounting and report capabilities, enhance regulatory reporting, garner greater insight and analysis on complex investments and achieve higher growth and revenue.
Every firm will react to the digital movement, but it’s how quickly and efficiently you react that will determine your competitive edge.