As 2021 kicked off, a lot of conversations seemed to be peppered with hopes that the next twelve months would be better than the last and that the calendar change might signify some kind of return to ‘normal’. It got me thinking. I wondered why – given that time is constant – we seem to assume the changeover of the year might also change our situation. Considering we put it there (January 1st has only been where it is for around 500 years), why do we place such importance on it as a milestone both personally and professionally?

Under Pressure – LinkedIn

From the date we’re born, we’re herded into numerous annual classifications. They’re throughout education, sport, leisure and, due to taxation and accounting cycles, the world of commerce too. The forces that affect a business in December one year usually still exist the following January, and overarching themes that affect an industry simply don’t go away overnight.

These forces present themselves to a business as “pressure”. Pressure that drives review, activity, decision and change. It’s not always necessarily negative – pressure can also be positive and generally, in one way or another, it creates change. It’s the pressure that’s fed into a business that makes it act. That pressure comes from demand, from regulators, from competitors, from clients, from management and so forth, and it’s needed to keep things evolving and improving. A business can handle a degree of pressure and probably needs it to operate efficiently. Problems only really arise when the pressure becomes too great, such as with a stream train, good pressure allows the train to perform well, however when the pressure gets too great, it may fail and explode!

Are we at that point now? It seems to me that there’s a whole raft of pressures hitting asset management firms from all angles and whilst some of the pressures existed this time last year, many may have grown exponentially if they’ve not been acted upon.

Neil Curham and Thomas Goldwater from Alpha FMC recently cited two key pressures in their article “Client Reporting: The Next Generation” (available here). They note that with regard to client reporting, there has been a steady increase in client expectation. This has resulted in investment firms having to improve their client reporting; more content, better presented, more personalised, more timely and so on. They also note that some investment firms may have previously been reluctant to upgrade and modernise their client reporting systems, and thus are now feeling pressure from the increase in costs in providing these higher levels of reporting and service to their clients on legacy platforms. Curham and Goldwater contend that many investment firms will be under even greater pressure now and forced to act and improve in the near future.

Similarly, State Street have prepared a lot of information and facilitated discussion under the heading “Crisis as Catalyst” (available here). They argue that the challenges brought about through Covid-19 and elsewhere will not only alter the competitive landscape through expected consolidation of investment firms in the industry but will also alter the organisational design of remaining combatants. Investment firms will need to re-organise and re-establish themselves with an even greater focus on efficiency and service than was expected 12 months ago – in some ways the crisis we’re all in has changed nothing but has only accelerated matters. Perhaps 10 or 15 years’ evolution is to be compressed into a significantly shorter period.

Then I heard about HUB, a new tech-led and cloud-based company that will provide “flexible and modular infrastructures for asset managers’ middle and back office functions” that PIMCO, Man Group, IHS Market, State Street, Microsoft and McKinsey are establishing. This news (if you hadn’t realised it already) acknowledges cloud as the way forward and potentially threatens many existing tech and service providers. As this modern and efficient technology is adopted in the industry, pressure will start to build on firms that remain on legacy platforms. Pressure will build in terms of operational efficiency, pressure in terms of accuracy and availability of data and likely cost pressures too. If successful, it will create a competitive advantage for its clients, built as it will be with the latest technology it will be costly and difficult to replicate in a legacy environment.

There’s a lot more too on both macro and micro levels. When you add them all up, you begin to wonder where the breaking point is? When businesses build up too much pressure, like the steam engine with no way to release the pressure, they start to fail.

The pressure needs to be released.

Right now, investment firms should be looking at assessing and planning for all the pressures that are impacting them – before they start to fail. They should also be making sure that their business model is fit for purpose today and future proofed for tomorrow. Taking the Alpha FMC examples noted above; clients wanting improved reporting and investment firms wanting to reduce their costs, we can help you do that now.

Reporting as a Service® removes the relentless pressures that build with inflexible legacy systems that can no longer satisfy the clients’ reporting requirements and does away with manual processes that simply don’t scale. Reporting as a Service is cloud based and simply interfaces with your other systems and processes, to create an efficient process delivering beautiful and world-class reports, at any scale required. The pay-per-use model is simple and transparent and typically allows firms to significantly reduce their overall spend on the client reporting function.

Andrew Sherlock
Opus Nebula