Some things are truly rare, like blue moons, Triple Crown winners and Major League Baseball players who have .400 batting averages.
There are rarities in finance, too. When infrequent happenings occur, they tend to create unique opportunities for us to look beyond the mundane problems, stretch our imaginations and take on — and solve — much larger challenges in more strategic ways. It's a nifty place to be.
We're seeing this happen with the future of regulatory technology in the asset management space. Various forces driving these changes are shifting and aligning in new ways.
This unique alignment is creating tremendous opportunities to reinvent the old, unglamorous back-office processes we've had in place for years, even decades.
In their place, our industry is imagining more vibrant, more agile and more inclusive processes that deliver significantly greater strategic business results.
With regtech, we have a golden opportunity to take the things we've built to handle specific requirements like the European Union's Alternative Investment Fund Managers Directive and the SEC's Money Market Fund reporting, and challenge ourselves to zoom out to focus on solving larger, more holistic problems.
Instead of nixing or slow-rolling these initiatives, leaders in our industry are seeing their potential and green-lighting them.
WHY NOW?
Why are so many people in our industry seizing the opportunity to stop having a million processes that essentially do the same thing? Why are they showing willingness to move away from little data islands and little information silos and taking the steps to really attack the larger problem? Let's take a deeper look at this growing trend.
In my experience, I've seen three roadblocks that get in the way of progress. The first is when there's a problem with no viable solution available. Second is when people build solutions for problems that either don't exist or are simply not important. Third, and maybe the toughest, is inertia. That's when there's a real problem and available solution, but no action is taken due to the organization's narrow focus, limited budget or lack of appetite for change.
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Some advisers are actually embracing changes by making the rules work for them.
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One key factor is the adviser’s tone during the exam – is it conciliatory or defiant? And remember, the examination and enforcement divisions know each other.
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RIAs using digital platforms will face scrutiny about disclosure and client communications.
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Happily, none of these roadblocks have plagued regtech. The challenges that regtech addresses are real, and there are viable solutions available. However, the really interesting dynamic here is that many investors are gaining clarity in their vision, and seeing that as digitalization continues to increase, the old boundaries that separated different parts of their operations are fading away.
They are recognizing that more unified and automated processes can yield new operational intelligence. Their imagination is being inspired by what regtech is doing.
BACK-OFFICE UPDATES
This last piece — the organizational "permission to reach further" — is paving the way for regtech to transform into a broader movement across fund servicing.
Firms are supercharging their regtech systems and applications so they can do more.
This is the tipping point that's creating datatech, extending the value of structured data and technology innovation beyond regtech to the entire post-trade ecosystem.
Existing tools are being augmented in ways that unlock significant advances in automation and data management.
Those advances are informing breakthrough improvements across the full range of asset managers' back-office functions — and more and more middle-office processes as well.
It's one of those moments that we at Confluence love to see. We have both an opportunity and the permission to act upon it.
Everyone stands to win
'SPARK THE IMAGINATION'
With datatech, firms can tap into their data in new ways and automate the production of a range of financial, marketing and statutory reports.
These capabilities spark the imaginations of in-house people who then challenge their tech vendors to think differently along with them. This tandem creates a virtuous circle that generates continuous innovation without requiring a new process or system at every turn. Now, instead of focusing on producing pre-ordained deliverables like prospectuses and financial statements, back-office processes will be optimized for shared data.
The smart and creative people in our industry will now be able to take that data in whatever directions intrigue them. With this new thinking and access, it's not hard to imagine insights from trade settlements, transaction accounting, compliance records and other back-office activities being used to inform and improve middle-office activities such as risk management, or even sales, marketing and other client-facing processes in the front office.
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No one can argue that this evolution is overdue. Back-office data has been underutilized for decades. The opportunity has arrived, and the shared data and digital infrastructures are now being put in place. We can take these advances as far as our imaginations allow.
There's a blue moon, a Triple Crown winner or a .400 hitter waiting to emerge from the shadows of your back-office operations. Don't fail to see it, and don't miss out on this rare opportunity.
As an industry, let's not squander this chance to reimagine the back office. Let's not allow old realities or today's requirements to inhibit tomorrow's possibilities. By embracing DataTech, we can avoid that trap.
Let's have some fun.
