Podcast transcript: How technology will help reframe asset management

Kathryn Burnside

Welcome everyone, to this podcast. I’m Kathryn Burnside, and I’m a Senior Manager in the Wealth & Asset Management Technology Consulting team at Ernst & Young LLP. Today, I’m joined by Scott Becchi, EY Global Wealth & Asset Management Technology Consulting Services Lead, based out of New York, to explore how technology will help to reframe the future of asset management. Thanks for your time today, Scott, and let’s jump straight in with a nice big open question:

What does the future of technology in asset management look like in the next five years?

Scott Becchi

Thank you, Kathryn, always a pleasure. Well, we believe that the combination of cyclical and structural shifts within the industry mean that asset managers will need to embrace technology to enhance their investment teams’ performance, analysis and data consumption to stand out. Technology will then also need to be used to automate repetitive operational activities, thus enabling highly skilled individuals to focus on activities that bring competitive advantages. Lastly, asset managers need to determine how to leverage technology to improve the overall client experience. But, at the moment, many asset managers lack integration across their investment management systems, and a holistic architecture and data foundation to make this technology transformation happen.

And, doing these things alone doesn’t fix the issue. What we’re seeing is that asset managers are recognizing technology as a lever in their broader strategic transformation, from the front to middle and the back office.

Burnside

I’m glad you mention that – front-office transformation is certainly one of the hottest topics on the agenda of our clients this side of the Atlantic. Here, the focus is not only on automation of repetitive tasks, but also on the need to differentiate and drive alpha. We all know the volume of data is ever-growing, and that creates opportunities to leverage analytics and machine learning (ML) techniques, combining big data with artificial intelligence (AI), to deliver alpha. Some of our clients are already using alternative data sources as an early indicator of market sentiment, integrating ML and AI. The big hurdle that asset managers need to overcome here is improving data quality and governance to help ensure accurate results.

Becchi

All this talk about AI, automation, ML and so on might lead our listeners to think the rise of the machines over humans is about to happen. What’s the role of people in all this technology transformation, from your point of view?

Burnside

(Speaking in a robotic voice), Well-Scott,-thanks-for-asking-that-question … No, seriously, I’m obviously not a robot, and I can assure you that humans will remain at the center of this transformation. Let me give you a concrete example; we recently worked with a European-based asset manager to identify automation use cases in the investment space. It wasn’t just the use of robotics that was the value add – it was layering other intelligence technologies on top, including natural language processing and optical character recognition. And, importantly, the concept of "citizen developers” was also a really key part of the design. The ability of their investment teams to have the structure and tools in place, to actually build those automations themselves, really turned the more traditional rollout approach for automation on its head. As more clients deploy “no-code” and “low-code” environments, we will see an increase in this citizen developer concept.

Becchi

Indeed, I would say that there’s enormous benefit in putting humans — both employees and customers— at the center of technology-enabled business transformation. Certainly, customers now expect businesses to know who they are, what they want, how they want it, and when they need it, so digital transformation in investment management needs to be oriented around the end customer. So, there needs to be a true customer book of record that provides value-add insights into customer behavior and needs, and an improved and personalized customer experience, from the onboarding to the ongoing service. Hence, we’re seeing increased take-up through portal adoption and channel integration to provide that customer with a 360-degree view.

But to get that nice, shiny, hyper-personalized front-end that your end customers see and love, you really need to have a good integrated technology stack, and you cannot ignore the importance of the middle and back office.

The opportunity for asset managers to really transform their operations in the near future is right there, ready for the taking. Our clients are looking at ways to leverage automation and integration technologies, either to reduce costs, improve efficiency or ideally both. And that really covers the whole middle to back office value chain, everything from achieving straight-through processing to improving the integration of platforms, improving quality and reducing errors, through to automating reconciliation, creating and reviewing marketing materials, to compliance rule coding and beyond.

Burnside

Yes Scott, and compliance is a great use case of this. We have recently developed an automated compliance rule processing tool for one client, which does exactly that. It extracts compliance rules from reading investment management agreements into structured, rationalized data sets and we’ve found this to be a really powerful tool in the asset management space, more broadly, as it’s such a common pain point.

Becchi

And what’s great is that builds like that can be so transferable across global markets. But, of course, it’s not just about what we, as EY have built, we need to acknowledge the role that fintechs will play in the future of asset management.

Burnside

Of course, Scott, just taking one great example in this space is of EzeOps. They apply ML and AI to the reconciliation process, and that really reduces the need for human intervention. Where we, as EY, play a key role is helping asset managers determine how to best leverage the various fintech options, combining industry and technology knowledge, and advising how to best integrate these tools with legacy technology platforms, e.g., by using application programming interfaces (APIs).

Becchi

Of course, APIs bring us right back to the importance of connecting to any tool in your stack and automating your processes. But, Kathryn, we have so far ignored the megabyte-sized elephant in the room: data! Across the board, underpinning all of this is better data infrastructure. Our experience shows that you have to create both the right data and technology environment to make this a success. Your base technology and data stack has to be in good shape before you start to layer on all of these additional technology components, be they mature vendor applications, versus fintech applications, versus in-house developed ones.

Thing is, it could take years to fix this, and years and millions have been spent on getting this “just right” at the cost of everything else.

So, where do you start when you have so much data? EY Consulting teams spend a lot of time helping clients figure out the answer to the question “Where exactly do you start?” Everyone wants to start with a nice flashy front-end, but if it’s built on top of older technology that can’t truly support it, you can end up creating a client experience that’s actually worse than before. As a result, we always advise clients to focus on high-value, high-impact data types (i.e., client data and product data). Once you have the right infrastructure in place, you can then quickly focus on other data types.

Burnside

It’s a tall order, for sure, Scott. Let’s break it down a little to make this more digestible. 

First of all, we’d advise clients to invest in a top-notch data aggregation and technology applications architecture. To be specific – by that, I mean, combining mature third-party platforms, fintech platforms and in-house developed applications, integrated in a manner that facilitates a “plug-in, play and replace” philosophy, using workflow technologies, be they no-code or low-code. Then, they can go on to manage processes across applications, with a cloud-enabled “golden source” of data, leveraging APIs to create connections to the entire ecosystem. Now, this issue of legacy technology becomes really acute when asset managers try to automate their processes.

Becchi

Yes, let’s be honest. When we talk about the way that technology will help reframe asset management, we should also acknowledge that legacy technology can actively hinder asset managers from capitalizing on new growth areas, for example, the need to combine public and private markets data, and the need to integrate environmental, social, and governance (ESG) data sets into your day-to-day operations. We should also acknowledge the need to keep in mind cybersecurity concerns alongside all this, and this inevitably comes up when clients move their operations into the cloud.

While the cloud is not a new topic, it’s now approached from a new angle. Clients are not just moving applications to cloud to increase efficiency and reduce cost, but we are helping them determine which ones are business- critical and how the cloud will enhance them. Another topic, coming up frequently, is the extent to which the infrastructure can be transitioned fully to cloud, and the value this can release — from providing real-time, actionable insights and enterprise-wide analytics to improving performance, operational efficiency, and operating costs. Some good, real-life examples here are data tools like Snowflake, which are better at enabling data in the cloud, and this is even more powerful when these tools are cloud-agnostic.

Burnside

Speaking of clouds, Scott, I think, the sun is setting on our podcast. I would really love to do this again sometime, and I hope our listeners enjoyed this discussion, too. If you would like to discuss any of the topics raised in this podcast, please contact Scott, me, or another member of the team via LinkedIn or ey.com. This concludes this podcast – thank you for listening!