A survey of asset managers globally has found that automating back office (BO) processes stands out as the key priority over the next two years as fund providers struggle to reduce manual input errors and deal with a growing burden of regulatory reporting requirements, according to findings in the 2016 Asset Management Industry Trends Survey published by Confluence.
Based on interviews with some 192 asset managers and third party service providers, the Survey found that 61% cited BO automation as their key goal. Other key objectives included the ability to manage simultaneous reporting requirements, 47%, while centralising fund data was another, 44%.
Among the reasons for BO automation, almost all, 91%, of the interviewees cited the ongoing reliance on manual processes and spreadsheets leading to errors, while a near similar number, 81%, cited improved cost control.
The Survey also highlighted that the industry is increasingly focused on centralising fund data, with some 71% of respondents stating that it is important to consolidate data to a common database, up from 50% in 2008. Again, it is the need to improve responses to regulatory demands, reduce errors and control costs that are key factors behind the common view.
Todd Moyer, executive vice president, Global Business Development at Confluence, said the automation demand trends noted through the survey reflected challenges facing the industry, for example, in the form of additional regulations.
And with evidence that manual processing errors are making it even more difficult to reduce costs, this has helped make back office automation a top priority.
“61% say automating the back office is a top priority; this is the fourth report in row in which it is identified as a top priority,” Moyer said.
Regulatory developments such as Dodd Frank are bleeding into Europe, where there is a continued need to collect data to meet regulatory requirements such as AIFMD.
Investing in IT does carry costs, of course, but Moyer argues that automation “means cost reduction”.
“Proliferation of manual processes means more cost, and more errors, which compounds costs over time. The urgency in markets is to be able to handle new data and new types of data. The need to automate is a requirement to handle volumes and types of data.”
Asset management firms are also being forced to deal with multiple regualtory regimes, for example, as cross-border business increases.
“We are really seeing tremendous need to look across borders and look at different regulatory regimes, and how that affects the back office process. But knowing that there are more regimes, the more complex it becomes.”
In regards to the survey findings that asset managers are struggling with multiple back office systems, Moyer says that this is a function also of an active regulatory environment, where asset managers have had to put in technology to respond as regulations have come into play.
“But now they see that this does not make sense given the volume of regulations on the way. The first step has been to look at data consolidation. More respondents have put data consolidation as top priority. Among those who have not put it as top priority there has been nearly a doubling in interest in looking at the data side.”
Consolidation of IT will also help with another area of concern: security. Moyes notes that the ability to deal with multiple IT vendors on different systems “can be challenging”.
“In US there is SEC modernisation around reporting standards. That takes up to 20 different systems of data. If you need to protect across multiple vendors, it becomes even more challenging. So consolidating can actually help.”
Summarising the value of the surey, Moyes says that the trends identified help focus work done by Confluence on finding the relevant solutions for asset managers.