Our industry tends to talk about data at the highest possible level — “data is the fuel powering the engine” or “data is the new oil” we say. Or we focus on massive projects to “unlock the value of our data” seeking to transform our own technology and business processing into data-centric models. Proclamations from 30,000 feet are very hard to confidently invest behind, particularly in times of compressed margin and limited investment capacity.
It has been fits and starts as the asset servicing industry has sought to refresh our relationships with our clients based on the mutual challenges and opportunities data presents. But if we can move forward distinguishing the characteristics that differentiate asset servicing and data servicing, we can collectively produce meaningful outcomes spanning the managers operating model.
In the current environment, asset managers should be thinking about data from the following perspectives:
1) “What data is critical to my most important core competencies?”
2) “Who can relieve me of the burden with respect to all other data and deliver outcomes?”
For asset managers, data related to core competencies should be prioritized, with an eye toward buying or building solutions that generate alpha and grow their business.. In other cases, where the front office requires back or middle office data to generate value, there are a variety of capabilities that a data servicer can provide to drive outcomes, including removing the friction associated with accessing third-party solutions.
The transformational opportunity is recognition that with respect to middle and back office data, asset servicers can pivot toward data services to drive outcomes in production. Asset servicers originate much of the data, they are experts with respect to the data, and they hold the data. Consider some examples of what assets servicers are often asked to do: send data to a third party, perform new calculations, make available new data sets via API or otherwise, publish new reports aggregating various data sets, trace derivatives holdings to underlying securities, or, increasingly, help work with fintechs or other service providers. Traditionally, these requests are accomplished organically, from the bottom up, addressing point in time, discrete needs of a client. This approach actually adds complexity to the asset manager and asset servicer relationship. Deliverables proliferate and age, and can often go unused yet continue to be promulgated, resulting in incremental cost on both sides of the relationship.
Late last year, we spoke to more than 50 global C-suite executives who oversee more than $18 trillion in AUM to understand their most pressing needs as it relates to their operating models. Unsurprisingly, data featured prominently: 57% of global asset managers are looking to improve their data abilities this year. Many of our clients expressed similar sentiments towards data in other conversations, telling us that legacy and unnecessary complexity has become one of their biggest concerns. What’s more, the majority of these clients rely on manual manipulation of data, have fragmented models between themselves and their providers, and raised concerns that business opportunities were limited because of data. Many clients, however, are willing to work with providers on solving these challenges, but the solutions need to be right sized against and responsive to specific circumstances. Well-conceived and well executed data services can address many of these challenges.
Data services focuses on expected outcomes and ensures solutions that address availability and accuracy of data in a scalable manner, necessary transformations of the data, and transmission to downstream users. Successful execution of these services aggregates data into a series of outcomes that drive meaningful but focused transformation of asset managers’ operating model.
We do not recommend managers build or rely on third-party multi-year enterprise level solutions designed to transform for the sake of technical transformation, or with the hope that better infrastructure represents a rising tide that floats all boats. Instead, we believe the better way forward is to choose specific pain points in the operating model and address each leveraging only the relevant data, the relevant subject matter experts on that data, and the relevant platform capabilities to drive the process end-to-end.
Our experience — and something that we had to learn the hard way — is that all data should not be treated equally. Data does not exist in a vacuum and data is not an asset until there is a business outcome that the data can drive. Contextualization is critical because the risk that data is the “tail that wags the dog” — consuming disproportionate resource and share of mind without commensurate value — is real. Contextualization ensures that data supports specific and defined strategic outcomes. In short, data requires a proportionate response: it should be afforded effort and investment consistent with the impact of the outcome.
Practically speaking, treating data unequally means that some data may continue to persist in processing systems or may reside in data marts or warehouses, never mapped to an API or made accessible through a self-service interface or digital tool. Other data — data that drives outcomes and used repeatedly — may be ingested into state-of-the-art data platforms with new capabilities and include both business and systems metadata and lineage. This data must be robustly managed, governed, and made accessible to business users. BBH’s Infuse client platform exposes relevant data sets across our products to drive specific insights and outcomes. In addition, Infomediary our data integration engine, continues to manage data including connectivity through configuration and mapping tools across our asset servicing business. This is highly relevant as our clients increasingly require flexible delivery and management of data from point a to points b – z.
In our view, a data servicer is able to prove value when it takes on pieces of an asset manager’s data outcomes rather than trying to step in and act as an enterprise solution for the manager. Like any other servicer, a data servicer should offer its services where it has deep domain expertise married to the right technology (a platform that includes consistent information architecture, service orientation and tool set and delivers a critical mass of capabilities). Working with our clients, and taking advantage of our Infuse and Infomediary technologies (e.g., ingestion, aggregation, normalization, transformation, visualization and delivery), we have identified a variety of data sets that a data servicer can create to provide meaningful value to clients. This value is manifested in a variety of use cases: front office distribution, ESG, client reporting, regulatory reporting, manager/subadvisor compliance reporting, and preparation of data for analytics platforms, just to name a few. Interestingly, each of these use cases start with common data elements, such as — fund holdings and positions, and then augments those elements with new data sets only as necessary and exploits those technical capabilities necessary to complete the use case. Achieving discrete outcomes in a more rapid and iterative manner means that value and ROI is delivered more quickly. Each use case is then a measurable contributor to a snowball effect on the managers’ operating model as momentum is achieved.
We also believe that one of our most important roles is facilitating and preserving client choice. BBH does not seek to lock our clients into a single provider asset servicing model. Similarly, with respect to data, we will best serve our clients by focusing on solutions that address data management challenges around ensuring accessibility of “fit for purpose” data —whether provided by BBH or another — our clients seek to exploit.
We predict that there will only be more and more use cases introduced by a growing diversity of providers for which our clients will desire access to data. Over 20 years ago, Infomediary itself was developed to play a messaging and connectivity role standing between our clients and the desired data solutions, removing the friction for both the manager and the service provider and accelerating the recognition of value for both parties. As our client’s needs have evolved, so too have our solutions. Our conviction on this topic will be evidenced in 2021 by the introduction of BBH’s connectors - a set of curated third-party developed solutions that we provide access to for our clients to drive meaningful outcomes.