Technology Can Offer Competitive Benefits for Investment Managers: The Next Generation of Fund Administration
Fund administrators should be viewed as a natural extension of their investment manager clients, providing services that work hand-in-hand with the investment manager across their value chain. However, as technology quickly advances today across the investment industry, firms are looking to administrators to expand their use of technology, and to also understand how it can help them and their shareholders/investors.
STRATEGIC AND SYNERGISTIC TECHNOLOGY
The investment industry is at a pivotal point regarding technology, so firms need to take an expansive look at the larger, more strategic and synergistic role that technology can play moving forward. Administrators and other service providers need to start thinking like true technology companies, versus administrators just utilizing technology. This mindset shift is significant and could provide a quantum leap toward positively impacting the businesses of investment managers – thus shifting how they compete in today’s changing industry. It’s the realization that it’s not just the strength of the technology in place, but how it is used when it is developed, especially with investment managers in mind.
A CRITICAL COMPONENT: VENDOR SELECTION
Asset managers with limited resources or limited access to the latest technology should strive to be knowledgeable when it comes to their vendor selections. Vendor choices today across all areas should be viewed as strategic technology partnerships. Together, that dynamic partnership can keep up with ongoing tech innovation, and also offer a competitive advantage for both their investor clients and their business. This could serve as the new competitive advantage in today’s industry being driven by accelerated innovation, fee compression, and other factors. By leveraging a vendor’s experience via their strategic technology plan, and by plugging into their tech stack, this could offer major advantages. Asset managers should look to their fund administrators to be strategic partners that not only serve their primary needs, but that also think strategically about forthcoming technology needs, and how those needs will play a pivotal role in their future success.
A CHALLENGE FOR ADMINISTRATORS
The challenge for investment managers regarding technology evolution is that most institutional administrators have a technology team that is shared across various departments throughout the broader corporate organization. Therefore, those teams usually have limited knowledge of how the technology is being applied from a business perspective, or the various downstream implications of how that technology is consumed by investment managers and advisers.
THE TECHNOLOGY ECOSYSTEM: PARTNERING FOR SUCCESS
In order to offer the most benefit to investment managers, superior fund administrators have to be strategic about developing their technology ecosystems. A valuable strategy is engaging with an administrator who invests in a combination of vendor-based technologies, along with developing in-house proprietary and forward-thinking technologies. Vendor technologies are typically developed through years of experience and industry knowledge, and by offering best-in-class products such as Fund Accounting and Transfer Agent systems that meet core needs.
COMPETITIVE BENEFITS OF TECHNOLOGY
If an administrator also makes investments in internally developed, proprietary technologies, the organization can tie those core vendor systems and data together with services like Application Programming Interface (API), Robotic Processing, Machine Learning, and Artificial Intelligence (AI). By uniting them to operate as a single system, investment managers are offered advanced and customizable capabilities to meet their specific needs. Smartly developed ecosystems, with both vendor-based technologies and those developed internally, can communicate seamlessly and offer tremendous competitive advantages to managers such as real-time access to data across multiple platforms, powerful customized solutions, top-notch service for clients, as well as expanded transparency, data insights, and reduced risk.
SOLUTIONS WITH A COST ADVANTAGE
Technology is continuously evolving and changing at a rapid pace in the financial industry, and keeping up can often motivate businesses to search for an innovative fund administrator with the advanced technology to propel them forward. A well-developed technology ecosystem can offer many benefits not currently available across most of the industry, allowing asset managers to utilize advanced technology solutions without the overwhelming cost that often comes with it, while more importantly, providing competitive advantages. As investment managers look to outsource to fund administrators, they should pay attention to the latest technology investments, partnerships, and integrations being developed within that organization, being certain to understand the overall impact to, and benefits for, their business and their future.