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Cloud Strategy for Asset Management Firms

How to use platform agility for driving alpha

The investment industry has significantly increased its cloud adoption during the last few years. A recent study suggested that 80 percent of asset managers use cloud solutions in some shape or form.

Here is a four-step approach to drive business outcomes through a well thought-out cloud strategy:

Author

Nicole Tovstiga

Content Strategist

Identify Key Drivers

For driving client alpha, asset managers need to identify the drivers that apply to their business.

1. Optimize TCO (Total Cost of Ownership) by implementing best-in-breed platforms for the investment life cycle. Examples include Aladdin at Brink Capital to support specific risk analytics needs for high-net-worth clients or State Street Alpha at Invesco that streamlines business operations.

2. Improve Customer Experience from prospecting to reporting: 64 percent of clients feel experience is more important than price in decision making. Asset managers must provide personalized, continuous, and consistent integrated omni- channel experiences to ensure that clients feel connected. This can be done by picking the best-in-breed cloud platforms for CRM (Salesforce, Ms Dynamics) or marketing (Marketo, Salesforce Marketing Cloud).

3. Use Data as Enabler — Aladdin Data Cloud and State Street Alpha data platform launched a partnership with Snowflake to make data available to asset management clients. Managers can leverage data to generate additional insights for portfolio managers to drive better investment decisions. This also enables streamline reporting (client and regulatory) with better data governance.

4. Drive Proprietary Solutions as Competitive Advantage — proprietary research and modelling using non-traditional data sets (social media or news feeds) in addition to traditional data sets helps determine strategies that will generate higher returns on investment.

5. Plug and Play architecture to reduce time to market. Solutions and platforms can help launch new services and products.

Align the Approach

Once drivers have been identified, it is important to align on all the possible ways to approach the drivers. The Publicis Sapient Evolve, Jump, Attack framework helps companies determine where they are and where to go.

Evolve

Incrementally transform the business by cost optimization or improving client experience

Jump

Create a new shell where the firm identifies key business functions (sales, research, investment management or reporting) which are lagging behind competitors or are expected to provide significant lift, and seeks cloud solutions to solve for these

Attack

Disrupt the space with a combination of cloud industry solutions and cloud native custom solutions to leap ahead of competition

  • Evolve: Mid-sized Asset Manager with focus on Index Funds is looking to consolidate its position
  • Jump: Large Asset Manager losing business to competitors wants to improve its positioning
  • Attack: An Asset Manager looking to enter a new segment, such as HNW Wealth trying to launch newer products and services such as active ETFs, to service new client demographics, enter new markets for example going global

Define Platform Model

With the right platform in place, asset managers can evolve and mature as product journeys accelerate.

1) Focus on Product Selection

Product selection should be more influenced by vision and strategy of the future, and less by the current needs and pain points. Asset managers should pick products by weighing the pros and cons of the product’s compatibility with their technology landscape and cloud preference, or perhaps plan around a multi-cloud strategy. An informed selection will enable TCO optimization, and the right end-to-end solution will help improve the customer experience across internal users (advisors, portfolio managers) and external clients.

2) Establish Data-centric Organization

Asset managers need a data-centric architecture to scale a multi-cloud, SAAS and custom application ecosystem.  Firms need to consider moving away from a purely functional structure like onboarding and reporting to a structure around value or data domains. This will enable them to have the ability to stay nimble, adapt quickly to changes and leverage emerging tech like AI and ML over cloud. In today’s world, asset managers are well aware of the possibilities of technology but there are challenges to unlock value due to the lack of data management.

To build a data centric organization, the following should be considered when selecting or building solutions:

  • Batch versus real time: focus on real time or near real-time solutions, if cost is not a constraint, build solutions in a way that they can scale based on business needs
  • Scalability and maintenance: easier to implement, scale and maintain infrastructure
  • Data sharing: choose platform (like Snowflake) which ease up sharing of data across clouds and applications/tools and enables having a single golden copy and multiple read copies
  • Data ingestion: use built-in integration interfaces with industry products and data providers or custom ingestion interfaces for every provider

Cloud independent solutions align well with the multi-cloud strategy of asset managers, as they are typically dealing with more than one cloud as part of several products in addition to their own solutions.

A data centric organization which uses cloud native solutions is optimally placed to stay competitive with other asset firms in terms of pricing and servicing and can adapt much quicker to the changing landscape.

Cloud native solutions are the way forward for asset managers as part of their data strategy. The cloud native solutions range from using cloud specific solutions like Amazon Redshift (AWS), DataBricks (Azure), Google Bigquery (Google) to cloud independent solutions like Snowflake.

3) Build Core Solutions

Even though asset managers use off-the-shelf SaaS solutions for their core business, data and reporting needs, there is still a case for developing and managing some of the core, proprietary solutions. The primary objectives are as follows:

  • Maintain the competitive advantage, not sharing the “secret sauce” for investment management.
  • Provide unified user experience across multiple products, for user enablement and reducing friction of using multiple different user interfaces.
  • Integrate multiple products as the integration is typically not as easy as it seems, especially when accounting for firm-specific processes.
  • Last but not least, to look at the next generation tech (AI and ML) as enablers; typically, the products in this space (specially SaaS) have not matured enough and hence is a relevant reason for firms to invest in.

It is important that asset managers reimagine or build these applications using cloud tools. Time-to-market, strong compute capability and unlimited storage, inbuilt security and authentication and above all inbuilt capabilities to deal with big data in real time and integration with the other products; it all presents a good case for having a clear cloud adoption strategy. This also sets up an asset manager to drive competitive advantage and enter newer segments more quickly, driving revenues.

Execute Cloud Strategy

Once asset manager has defined the key drivers, aligned on the approach and platform agility models they are ready to execute their Cloud Strategy to drive their desired outcomes.

The following diagram depicts how all this comes together and the different Cloud Adoption Strategies:

Few asset managers and product firms fully use the features under the “Cloud as Enabler” column in the diagram above and even fewer look at “Cloud as Differentiator” features, primarily because most asset management firms are completely occupied with running the business and keeping up with changing demands of markets and regulation. Most asset managers have accomplished the Lift and Shift stage and are slowly moving to drive the true power of Cloud.

The gap in what is desired and what is accomplished is borne out in the jump to implementing cloud adoption strategies, without first understanding their key business drivers (Alpha drivers) and not having a clear approach and alignment on platform models. It is a case of execution without a thought through strategy and approach which leads to sub-optimal results.

The above-described framework and approach can enable asset managers to be more strategic in their cloud adoption and drive long term success in terms of leapfrogging competition, beating emerging fintechs and establishing strong client advocacy.

Manish Moorjani
Manish Moorjani
Senior Director of Product Management
Ruchira Agarwal
Ruchira Agarwal
Associate Director, Product Management

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