During our annual US Client Symposium on April 26, 2018, BBH brought together leaders from across the asset management industry to discuss middle office transformation, emergence of flexible technologies, and burning platform for change. With growing fee pressure, managers are investing in new, complex instruments and asset types which push on the middle office and legacy operations and systems need to flex in new ways.
Ian Brodie, Vice President, Business Transformation Office at Manulife, spoke about the growth dynamic his firm is experiencing and what that means for his middle office. “Scalability is our number one challenge.” So how does a manager double in size without doubling the people? “Drive the middle office to zero and free up our experts for more value-added work. We’re hiring data scientists within our middle office to provide data analytics so the front office can act more efficiently.”
Tom Phipps, Principal – Practice Lead, Operational Strategy at Cutter Associates, said his clients are looking to him for help choosing technology and service vendors, but many haven’t yet done the strategic work to prepare for that decision. His advice is to start with a business services model and systems architecture (data and applications) and then determine a clear end state vision. “Managers should start with the business operating model and be doing proof of concepts with these new technologies to be ready.”
Brodie, amid a middle and back office transformation project, said his end state vision is to “move from a data access focus to a data analytics focus. We’ve spent so much time getting data in one place with the ability to access it – next we need to figure out how to make better decisions off of it.” He hopes to automate everything, so there are no reconciliations, and everyone has real-time access to data with a flexible model that can easily accommodate new asset types. Per Ian, the transformation will be successful when they free up subject matter experts for more value-add work.
Anita Kerr, Managing Director and Chief Operating Officer, BBH Investment Management, explained how emerging technology is creating new opportunities in the investment operations space. “We can renovate the house while we’re living it without having to do a big bang. Solutions that incorporate use of emerging technology allow for a modular approach; we can take smaller bites of the apple.” Lighter solutions allow flexibility as our business matures, she said.
A critical success factor that clients are least likely to properly plan for and execute is organizational readiness, Brodie said. Management roles need to change and firms should hire transformation agents. It’s also important to ready existing staff by using a robust communication platform to show off the technology and investments, and follow the dollar. This helps people to envision the new ecosystem, creates intellectual curiosity, and boosts competitive skillsets staff will need for new types of roles.
Kerr echoed a similar sentiment. She believes a factor for success is developing a strategy and socializing it. “We don’t do enough talking to our everyday users – engagement must be horizontal and vertical.”
The group also shared insight into failures they’ve witnessed. Don’t underestimate data architecture and a proper governance model, Phipps said. Too often, firms don’t incorporate this early enough into their process. All agreed it’s important to fix processes before automating them. Robotic Process Automation is only valuable when the process itself is valuable.
Finally, don’t leave middle office behind. Front office focus can cause the middle office to fall to second priority. Instead, use the middle office to leverage value for front office operations.
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The views expressed by the guest speakers are as of April 26, 2018 and may or may not be consistent with the views of Brown Brothers Harriman & Co. and its subsidiaries and affiliates (“BBH”), and are intended for informational purposes only. IS-03951-2018-05-07