Stepped up data demands and scrutiny by industry regulators on asset managers have transformed technology procurement and implementation at firms into a complex process that requires close cooperation between chief technology and compliance officers, among other executives.

"Ten years ago, I would've said the weight in these technology decisions was 80% toward the chief technology officer, because nobody understood what he was proposing," says Shaheen Dil, global solution leader for data and analytics at Protiviti, a Menlo Park, Calif.-based risk management firm. "That's not a viable modus operandi anymore. The chief compliance officer has too much at risk. They have had to teach themselves technology, as some aspects of compliance are now very data driven. They, along with chief marketing officer, the chief operating officer and chief financial officer will have more input. It's not just a tech decision anymore."

Also spurring a collective approach toward buying and integrating technology is the desire to reduce data errors that carry regulatory and reputational risks, says Todd Moyer, executive vice president and global head of business development at Confluence, a Pittsburgh, Pa.-based investment data management firm. "We are seeing more chief compliance officers and COOs involved in our client meetings, because errors in managing and reporting investor and regulatory data are increasingly seen as a reputational risk that can quickly result in a loss of assets," he says. "I think there is a growing concern among asset managers that if investors think they can't rely on them to deliver consistently accurate reports, they won't be able to trust them to manage their money."


Moyer's firm conducted a survey earlier this year among asset managers to determine concerns about data management. The survey found that 61% were planning on replacing manual back-office processes with automated technology.

That swapping out of legacy systems into new processes and technologies, is giving compliance officers the opportunity to become more involved in technology procurement and systems deployment to ensure they are aligned with modern compliance demands, says Michael Rosella, chair of the investment funds practice at New York-based law firm Paul Hastings.

"Historically, when asset managers go buy a new tech system, particularly on the portfolio side, the conversion from one to another brings up so many compliance issues," he says. "You are transferring massive amounts of data, and if that is not done seamlessly and with forethought, there will be mistakes and compliance violations. Even the best system doesn't keep an eye on compliance. You may lose data - sometimes problems come up two or three years later. Tech and compliance now go hand-in-hand."

Rosella adds that compliance officers have become reliant on their firm's technology teams to deliver the information they need to respond to regulator data requests. "Because so much information is flowing through the regulatory framework of the asset management business, if they are not coordinating with their tech folks, they are going to be lost. You can't just have spreadsheet that looks at leverage limitations. You need software that can deliver data in real time. The old fashioned way of doing things by hand is not going to work."

Responding to that demand has been a steep learning curve for many non-technical C-suite executives, Dil says. "At first there's surprise among people on the tech side that the rest of the world doesn't understand the complex language that to them is very self-evident."


Compliance officers should at least be knowledgeable of tech solutions, but not necessarily experts, says Martin Dean, chief compliance officer at Cincinnati, Ohio-based Huntington Funds and head of the Huntington Asset Services legal and compliance group.

It's more important for them to be involved from the start of the tech procurement process, he says. "That way there is compliance and risk management throughout the entire process and not just at the end. If you leave compliance concerns until the end of the process, you may need to start over."

To adddress increased compliance demands on technology at asset managers, Huntington Funds has broken up its technology procurement and implementation process into different responsibilites that work in concert, Dean says. "It's important to have the business side, technology and compliance coming together to evaluate the strength of a particular solution."

At the fund, tech vendors are evaluated by one unit, he says, and his compliance team works with them to understand what solutions are available in the market. The technology team evaluates the efficiency, fit and customization of the solution, while the business side assess how well it ultimately assists their work.

"The solution needs to answer a business need at its core; however, the ongoing demands of risk management around every aspect of our business really elevates some concerns that are not solutions-related," Dean says. "It is important to have that overlay of compliance and vendor management with technology needs."

The process of evaluating a technology proposal to a final agreement on procurement takes at least six to nine months depending on the size of the buy, he says, and that estimate is on the low end for fairly narrow, focused solutions, he adds.


Technology vendors note that such a layered, multi-party approach at asset management firms is lengthening the process to close with a customer.

"It makes for a more time-consuming sale since you have to meet with more people during the sales process," says Kevin MacDonald, co-CEO and co-founder of Black Mountain Systems, a San Diego, Ca.-based software developer that services the asset management industry. "That can slow the process down, but it makes the sale easier when you have engagement from both technology and the business group."

In some firms, MacDonald adds his sales representatives find the chief technology officer managing the software selection process, and at others it is the compliance or portfolio manager. "Our favorite is when both the technology and business groups participate," he says.

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