Portfolio & Relationship Management in the Cloud

Transcription

1 Portfolio & Relationship Management in the Cloud Software without the technology headaches White Paper by David Wilson, Director, International Sales & Marketing 23 rd May 2013

2 Index Can you have your cake and eat it? Portfolio & Relationship Management software without the technology headaches! A wealth manager s front office focus on return and a better service. So what should a Portfolio and Relationship Management Front Office service deliver? Not only software, operations are part of the solution too How quickly can I see a return? How about security: is my data safe? Make it simple, make it quick, make it affordable Objectway - White Paper 1

3 1. Can you have your cake and eat it? Portfolio & Relationship Management software without the Technology headaches! The industry is buzzing with new technology and with new technology comes new buzzwords and phrases! Cloud Computing, Software on Demand, Software as a Service. But what does it all mean? And is it relevant to your business? Well I believe the answer is a resounding Yes and I would like to explain why. Many people associate implementing software with buying a package, together with the hardware to run it on. With that comes infrastructure and operations staff overhead that has to be factored into the cost of running your business. Cloud Computing and Software as a Service is changing all of these dynamics. Of course there is also the additional burden of integrating with other applications and ensuring that these reconcile and can be audited. But a true Software as a Service solution should also be able to remove the need for this. So first, a quick explanation of the three buzz phrases we started with: Cloud Computing, simply put, means that the infrastructure you use is provided by somebody else, somewhere else so long as you can connect to it, you don t need to know where it is, it might as well be in the clouds. Software on Demand, generally, means that you have your own, unique version of a software package, but the infrastructure is in the Cloud. The implementation process is not necessarily shortened, but the operating costs are lower than an in-house solution. Software as a Service, means that you share the software as well albeit personalised to the way you work and white-labeled with your company s look and feel. Not only do you lower your operating costs, but implementation costs and timescales are also virtually eliminated. In this whitepaper, we will use the example of a front office portfolio management system, and explore how using such a system in the Cloud could save you time and money. Objectway - White Paper 2

4 2. A wealth manager s front office focus on return and a better service. A portfolio and relationship management front office system is normally interfaced to a back office system, or custodians, or even combinations of these, ie. the source books and records. Historically, integrating with any back office or data source has been a torturous task it has been viewed as a large, time consuming and somewhat expensive project undertaking. The result of this can be limiting to smaller firms, and only the larger enterprises typically could afford it or afford to wait. The software that is now available in the Cloud was previously out of reach of many members of the wealth management community. In this paper, we will look at the questions you should ask when considering what your portfolio and relationship management software needs are. Then we will look at how the industry move to Cloud Computing and Software as a Service (SaaS) has changed the way that you can now quickly and cost effectively begin to use that software. Today there are only a few software vendors offering industry standard, globally established, front office portfolio and relationship management systems, in the Cloud. What is the reason for this? It is because smaller start-up vendors cannot afford the infrastructure to offer Cloud services; and the legacy software vendors are still grappling with their business model, which is based on selling licenses with significant one-off capital outlay. Not many have yet recognized that the Cloud offers a new market, or come to terms with the fact it also means that the business model for them becomes service-based, not just supplying software. To be successful they need to become service providers, and the software becomes just one element of a more all-encompassing service. Quite simply put, Cloud computing means that you can now use business application software without buying any software or hardware, without deploying anything internally. With Software as a Service in particular, you should be able to switch it on and use it immediately pre-configured with your set-up, pre-loaded with your products and prices. Objectway - White Paper 3

5 (Remember, Software on Demand may require a longer configuration timescale, as the software implementation is effectively bespoke to you.) These software service providers take care of sourcing and loading your data every day, making sure your portfolios are updated every night, so that when you arrive at the office and turn on your computer you can immediately view your clients and their up to date portfolio valuations. Not only that, with Software as a Service, some providers will have you up and running in a matter of days not months. This is because the software you use will already be largely pre-configured for the way you work. Finally, there is none of the traditional initial outlay of capital expenditure! The vendor simply charges a monthly fee per user for using the software. Sound simple and attractive? Of course, it should be! 3. So what should a Portfolio and Relationship Management Front Office service deliver? For many wealth firms, or custodians servicing wealth firms, this will be a new and attractive way to access (or in the case of custodians, provide) software previously not affordable or attainable. It will become the most cost effective solution to help manage client money more efficiently. It can be a standard, out of the box service. You could call it a Public Software as a Service (Public SaaS), available to any wealth manager who can pay the monthly service fee. Larger organizations may want to configure software that gives them more differentiation and portrays their unique offering to their clients. That is fine too, where the software vendor can offer a more differentiated Private Software as a Service (Private SaaS), which allows the wealth manager to have more active control of their configuration, customised where appropriate and reflecting exactly the workflows that exist in their business. But still, the whole infrastructure and upgrading process is hidden and protected from them. The difference then between Public SaaS and Private SaaS can be defined in high level terms as the difference between a standard vanilla pre-configuration versus a tailored configuration, moulded to your unique business practice. The price you pay will then be reflected in the additional private features you use. What is the scope of the functionality you could look for? That depends on the focus of your business and how you are organised to do business with your clients. For example, Objectway - White Paper 4

6 if you are a relationship manager, your main focus is to acquire customers, so CRM features such as opportunity management, contacts, KYC recording, profiling and proposal generation might dominate your requirements. If Discretionary management is a priority, then modeling, rebalancing and order generation, with execution in the markets you operate in, would be the features you expect. Performance analysis, client reporting and even document archiving are also key components of any wealth management system that are likely to be important to you, whether you are advisory or discretionary. This functionality is now widely available and increasingly available in the Cloud. And where it is delivered as a Service, it will also be pre-configured so you can very quickly look at how it will work for you; and then be up and running as soon as possible after you decide to use it. And if it doesn t have every feature that you expected, or precisely match the way you currently work, it will be proven; so before you think about Private SaaS, consider: does the overall benefit of an immediately available, ready to use service outweigh this? Remember, the quicker you are up and running and seeing a return, the better. Far better than waiting for features to be configured or even developed and delivered later on. Surveys show that in implementing systems, only 60-70% of available features are used or even implemented at first; and that many perceived requirements disappear when the natural operating features and processes of new software are deployed. With requirements and markets changing faster than ever before, the 9 month implementation cycle is now viewed as too long and risky. The real benefit of taking an out of the box solution is the contribution to significantly shorter implementations, lower cost and quicker returns. Afterwards, once a system is live, you can start to add more functionality gradually over time, in partnership with your service provider. And with Software as a Service, if the new features are shared, so too will the costs be shared. Lower costs, for ever! In taking such an approach, you will see how quickly information is accessed, performance analysed, investment decisions executed and greater service achieved. All at a lower cost than you thought possible. Objectway - White Paper 5

7 4. Not only software, operations are part of the solution too Looking at what s going on behind the scenes. Let us call it Operations. It includes Hardware, Infrastructure, Data and Processing.: Hardware, Software and Infrastructure Your software is in the Cloud now, so you don t need to buy any hardware, you simply log onto a secure data center using a secure internet connection. That data center should be ISO standard, totally secure with full disaster recovery. That means, if one data center fails the systems automatically transfer to another data center, where your up to date data has already been replicated, seamlessly without you even noticing. You are assured therefore of full business continuity for your Software as a Service. In most cases, you should have access to your data all of the time, there should be little or no downtime. And normally these services have call centers with 24x7 support make sure you ask this question. If there is some downtime, of course the service provider should tell you in good time with plenty of notice. What could cause this? Well from time to time they will have to upgrade and update their software, infrastructure, operating software, etc., with new features or services; and they will keep the hardware and systems software up to date to make sure you get the best response times all of the time. This ensures that your business applications, your hardware and systems software are future proof. At no additional cost so another worry taken care of! Data and Overnight Processing Your data, that is your client portfolios, should be updated every night. Your supplier should take care of collecting that data, be that daily transactions or even just holdings at position level; collecting it from wherever you normally receive it typically your back office or custodians. You should not need to worry about how that data is aggregated then integrated, the service provider should do this for you. So the big issue of how to get data from a back office or custodian should never be your issue. If a service provider is any good, then they have to take responsibility for sourcing and formatting your data, from wherever that may be. Now given that your transactions will come in from a back office or indeed your custodians, most custodians will deliver data in their own unique format and it is the responsibility of the service vendor to aggregate the data and populate your clients portfolios. Before Software as a Service, that was a major task and you had to pay for that development Objectway - White Paper 6

8 and maintain that interface. But now it should be just another service from your service provider. Having collected that data, the supplier should update and value it using the latest security data and close of day prices. The prices should be provided to you as part of the service. You shouldn t need to worry about that either! Normally, your securities pricing comes from a data vendor such as Thomson Reuters, FTID or Bloomberg; this should now be supplied as part of the service complete end of day securities pricing. Once your daily transactions or positions have been loaded, they should be valued according to latest end of day prices by your supplier. You actually should not need to worry about paying for data from a data provider. So in the morning when you arrive at work, the system will be completely up to date with the latest valuation. Finally the service should support your orders going either to RSP s, or to your OMS or execution platforms, via a Straight Through Process (STP), in addition to printing your order ticket. 5. How quickly can I see a return? Daily operations taken care of, how do you get started? Let us take a look at what it should take to get you up and running; how to go about implementing your system. Remember we mentioned at the beginning how the systems can be pre-configured and ready to go? It means that if you accept that what you see is what you get, that s it! So for the maximum benefits, can your business operate with the software, straight out of the box? That should be your most important first question. Imagine a pre-populated system with a securities universe that includes your universe of equities, funds and bonds, that you do not have to set-up or manage. An optional extra might be a more comprehensive set of global securities. You might also want to request that you can set up your own securities. Now you have a pre-configured system with industry standard asset classes, categories and classifications, and if you want to change them and make your own, you can do that later. Next you want to check that there is a comprehensive set of standard reports tailored with your company logo, personalized and ready to send to your clients. Look for GIPScompliant performance analysis, as this is real added value for you and your clients. Now usually the most onerous task of any new system is loading up the initial data for your clients and their opening positions. Can this process be simplified as well? There are many options your Software as a Service supplier should be able to help you with the most expedient. You can ask your back office supplier or custodians to deliver Objectway - White Paper 7

9 you opening balances and current transactions. It all depends on what and how much they can deliver. If that proves troublesome (and if it does, you need to ask your back office supplier or custodian: why?) you can always use a standard spreadsheet definition and with the help and advice from the service provider, it should be quite simple to load this data. Be aware that you might experience resistance especially if you want historic performance figures loaded from the source; but if you had performance reporting before, make sure you ask to get that loaded, as your historical performance valuations will be expected by your clients. Now once your opening position is loaded, the daily task of loading movement transactions begins. We have already seen how this should be an automated overnight process which is managed by the service provider. They should be ready to go and you should not need to do anything! Every morning expect a reconciliation report, which may highlight any changes you need to do during the day to resolve any discrepancies. So the whole process of initial data load can be reduced to days the only unknown is how long does it take your custodian or back office supplier to co-operate and then you can be live in days, not months. Anything else you need to think about? 6. How about security: is my data safe? Let s face it, a major obstacle in your mind to any kind of internet deployed service is going to be security? How safe is my customer data and how secure are the data centers? Over the last couple of years, we have seen a sea change in this attitude, mainly driven by reality and cost: In the consumer arena, with the proliferation of tablets and easy access to apps, the amount of personal data in the cloud has become widespread. As the security required to protect consumers has become proven, so too it has been able to be applied to the commercial world, allowing the Cloud and Software as a Service to become a practical, secure reality for banking and wealth management. As an example, we have seen major financial institutions using software such as Salesforce to store customer data outside their own premises completely securely. Any service provider should now offer varying flavours of authentication from PKI tokens to user passwords. In fact in some cases these data centers can be more secure than your own infrastructure! And just as the real barriers have now been removed, the emotional barrier is breaking down slowly but surely, as the stark reality of the business benefit outweighs any other concerns. Objectway - White Paper 8

10 7. Make it simple, make it quick, make it affordable That s Software as a Service in the Cloud what could be simpler or more cost effective for you? A switch on service, where you pay for how much you use. You can now get industry leading, portfolio and relationship management software, with performance reporting, that you previously thought was beyond your budget. A pre-configured service, pre-loaded with products and prices can be ready to use in days not months. If it can work for you out of the box, you get huge cost savings and less management burden immediately! And remember, if you start with a Public Software as a Service (SaaS), you can always migrate gradually to a Private SaaS as your business grows. No infrastructure to manage! No investment up front! Some vendors will even let you use it for a trial period. That s it, Pay as you Go is the way to go, and worry free operations! Now you can spend more time with your clients, give them answers faster, provide information when they ask for it and overall improve your service to them at a low cost. Time to look around! Cloud Computing and Software as a Service are the future. And the future is now! Gartner Objectway - White Paper 9