Technology has driven considerable change in our world, but the incredible advancements in insights, connectivity, and automation has meant that companies who haven’t modernized are starting to fall behind. Many investment management firms are looking to modernization as a key competitive advantage and a top priority. When the driving force doesn’t come from management and technology users see the potential for change, the burden of selling the value of technology modernization lies with the users.
You may see pain points in existing workflows and the opportunity to re-imagine systems and processes, and with budget season approaching, now is often the time to assess technology for the next year. Overhauling a firm’s investment process is no easy task and portfolio managers are often tasked with not only discussing existing issues but also providing a viable solution. As portfolio managers become internal change agents, there are 4 major considerations to take into account before demonstrating to senior management how new technology can create considerable value.
Defining the value and goals for modernizing your tech stack
Before embarking on a major modernization initiative, you need to clearly articulate and define the technology’s value that you anticipate will bring to the firm. Senior management will consider how this product will generate additional revenue, if it satisfies client’s need to protect revenue, or if it improves internal operations that reduce costs or improve efficiencies. Being clear in the ultimate value you’re bringing to the firm and defining the criteria for success will be necessary for internal negotiations. You should be able to clearly define how new data or technology will enable your firm to:
- Bring new products to market: Does this technology enable you to offer new solutions and provide unique investment opportunities previously not attainable?
- Service clients better: Does it expand your ability to provide transparency and customized experiences for clients?
- Grow AUM: Does a new platform bring the ability to automate and increase capacity to manage more assets without additional headcount?
- Increase overall performance: Does the new functionality provide you with enhanced insights or predictive analytics to inform stronger investment decisions?
Quantifying the ROI on a technology investment
Once the value of technology is clearly defined, as an agent of change you need to demonstrate how much value purchasing a new system, such as an Investment Management Software (IMS) platform, and how to measure the success of that value. Success can be quantified in AUM growth, outperformance, client satisfaction and/or error reduction. Success can also arbitrary term that can mean different things to many different people. This can take the form of how much it will improve day-to-day operations through automation and enhanced visibility into analytics; others view alignment the front-, middle-, and back-office and increased collaboration as the metrics of success.
Regardless, it is important to attach quantifiable milestones and the potential ROI on a system. For example, if you’re consolidating legacy systems – which had siloed data across various teams – you can retire systems and often save on costs. Alternatively, how a new platform boosts productivity and performance by providing expansive insights across all portfolios results in higher client satisfaction and, thus, AUM growth. As a general rule of thumb, most investments in technology should be aligned with how it enables firms to grow assets, mitigate risk, or improve investment performance.
Overcoming the objections from skeptics
As prepared as you may be, there will always be skeptics or nay-sayers in the room. It is important to anticipate the likely objections senior management will in order to prepare a strong rationale. For example, a CFO who is aiming to cut costs questioning a new technology investment or the CTO who wants to know about integrations into the existing tech ecosystem or resources required for implementation. Many times, these concerns arise from genuine concern and can be eased with a demonstration of ROI, value-add, and thoroughness of research into vendors. One instance may be how the additional insight and automation saves your time and increases your capacity to focus on higher-value work, that results in firm growth.
Solidifying the pitch to key stakeholders and ultimate decision-makers
As champion for technology, you should work with your vendors on resources for pitching the value of the investment. When creating a well-rounded, iron-clad approach for a new system internally, it’s important to consider the different roles and objectives that resonate with different levels and departments. What are their top concerns and what are their goals? How does this investment tie into that? Addressing each stakeholder by keeping their top concerns in mind and making a clear connection to how the technology overcomes pain points will be more likely to succeed. By providing clear examples that demonstrate the benefits of making a technology investment will go a long way in executive buy-in on need and value.
Hear Marc Piccuirro, Fixed Income Portfolio Manager at Wellington, discuss how he pitches software to different levels of management.
Once you have made an initial pitch, it may be necessary to address the issues and benefits with the ultimate decision-maker. You need to consider how to escalate the initiative to the right people – how do you move up the food chain and who will you need to get on board? This often means convincing other potential users, additional approvals from executives, and additional stakeholders in the company. Additionally, most firms need to conduct a full technology evaluation, initiating the RFP process, conducting vendor due diligence, and assessing security concerns.
As soon as all the pieces are in place – clearly defined objectives, quantified purchase, and objection handling – any portfolio manager is ready to embark on the modernization process that will increase time to value. Investment firms have the potential to make great advancements in technology with so much to gain at stake.
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