InvestOps USA 2019 Key Takeaways

Earlier this month, Russell Feldman, John Mizzi and Sean Lasher of the IMTC (formerly CBXmarket) team attended the InvestOps USA 2019 conference just outside of Tampa, Florida. COOs, CTOs and other operations professionals converged to discuss current trends shaping the industry. Presentations covered an array of topics, including:

• Challenges being navigated among Investment Operations Teams
• Best practices being deployed to drive digital transformations
• The benefits of automation, machine learning and data management solutions in today’s operating environment
• Organizational design and strategies to support agile operating models
• Middle-office operating models: Outsourcing operations vs. maintaining in-house talent W

While a diversified investment manager has many options in deploying strategies to manage operations, conference presentations encompassed several recurring themes. Below is a list of key takeaways we heard.

1. Digital transformations are hard work

Kickstarting an implementation process is going to create friction but investing the time to persuade and cultivate buy-in among key stakeholders is crucial to ensuring a successful outcome. Decision-making responsibilities should be clearly defined from the outset, requiring the “buyer” to establish and socialize the framework whereby options will be evaluated at each step in the process. As the product champion, you will need to convince your team that leaving the status quo behind to embark into the unknown can yield a significantly more desirable future state of operations. This is no small task, particularly among an audience of skeptical middle- and back-office personnel. The process of digitizing operations inherently leads to faster change cycles—change begets change—so make sure your organization is prepared to adapt before you initiate the process. A few vital areas to survey before kicking off a transformation effort include:

• IT acumen: Your IT organization needs the appropriate talent to support various business units that will be affected by the project
• Investment acumen: You’ll need to develop the human capital that can handle both IT and investment responsibilities
• Project management: Dedicate a project management team to deploy new technologies in order to mitigate details slipping through the cracks

2. Start thinking about service providers as partners rather than vendors

The right solution must provide more than the out-of-the-box functionality you need today; it also needs to be aligned strategically with your organization’s long-term objectives. This requires an intensive focus on vendor evaluation, and the resources to run a thorough due diligence process. Technology partners should provide enough flexibility to accommodate the business requirements of your organization. However, it is also important to be open to suggestions around feasible enhancements that could be realized as part of the technology transformation process. A few items to consider while defining who the right partner might be for your organization:

• Can they support your operating model today, and in the future?
• Is their operating model cost effective?
• Do they integrate well with the other products you will maintain?
• Can you get a sense for the culture of the vendor?
• Will they be accountable and responsible?

In the end, there is a business relationship that must be maintained between your organization’s product owner and your point of contact at the vendor. Make sure you trust that contact as you will be working closely together for quite a while.

3. Communication is key

Maintaining buy-in through the process is going to require an abundance of communication. From the kick-off of a technology implementation process, it is crucial to openly discuss the business requirements and evaluation criteria among a broad group of stakeholders. Decision-making without proper education around options can result in an underwhelming solution. As one consultant noted, “The level of agnostic behavior investment professionals demonstrate toward digital transformation is a red flag.” You need to explain the necessity and benefits of the transformation process. This is a generally under-leveraged tactic that helps teams maintain a long-term perspective through the trying days of the implementation. Digital transformation projects can easily go sideways as there will inevitably be surprises that arise with respect to timelines, budget, technical functionality and system requirements. Maintaining transparency around the status of developments will alleviate the shock of any major surprises.

4. Investment operations units need to drive transformation

While there’s no looming the threat of investment operations roles becoming obsolete, it’s imperative that middle- and back-office staff transition from “business-as-usual” process execution toward business enablement. Executives speaking on the ‘Overcoming Operational Efficiency Challenges’ panel collectively described the state of Investment Operations organizations today. With the current status quo, panelists opined on the issues associated with maintaining a stable run of existing processes. An investment ops unit that maintains a passive data management strategy is positioned as a follower rather than a leader of digital innovation. Digitally optimizing businesses for the future requires operations to take a proactive approach in five key ways: continually enhancing the target operating model (TOM); utilizing DevOps to produce optimized, scalable IT architecture; streamlining data governance and active data management, with a focus on continuous improvement of quality standards; aggressively supporting interactions with other functions; and enabling the adaptation and exchange of global best practices. According to Dave Winter, Head of Investment Operations at Aberdeen Standard Investments, “The middle-office is uniquely positioned to drive more value, more revenue opportunities and more insights around where to find business efficiencies and opportunities [such as] product development and cost accounting on client relationships.” Take advantage of the opportunity!

5. Clean up and consolidate

Decluttering the system landscape is crucial to realize benefits of digitization. As Dominic Flanagan, Chief Development Officer for Institutional & Investment Management at SS&C pointed out, managers historically had two choices: throw more people at problems as they arose—an ineffective strategy, since the cause of most problems are people—or build everything themselves, rather than integrating new technologies. The Connectivity and ease of integration is a crucial criterion to consider when evaluating new technology. Creating “band-aid” quick fixes is only going to form barriers to a true data quality solution. A good, clean data set provides operational alpha for both the investment process and the client experience. Attaining operational alpha requires getting data in the systems and in the hands of end users. Better data enables better decision-making. Although there is not one silver bullet solution in the market, once you prioritize, it becomes much easier to identify and implement a solution that gets you most of the way there. “When we have machines and products and processes that can optimize or automate, that will be competitive differentiator for the firm” Uday Kiran Bolusani, VP of Global Product & Clearing at Fidelity, noted. I will leave you with a few reflections to ponder as you think about Investment Operations priorities for 2019:

• Is your organization taking an active enough role in shaping your environment?
• Are you having enough conversations with technology firms to be a forward thinker?
• Are you influencing the other leaders of your organization well enough to effect change and position yourself in an enabler function?
• What is the appropriate balance between product owner and senior management in the system decision-making process?
• What is the appropriate cycle for evaluating systems and implementing changes?
• How do you mitigate implementation risk while maintaining an agile operating framework?