All big Wall Street players like JPMorgan, Citadel, Point72 continue to move to the public cloud. As INSIDER puts it, “who they are and what they do is now more important than ever.” While the business case is not evident, even if the move to the cloud is just break-even, elasticity, the ecosystem, and innovation are key drivers for moving to the public cloud. Not to mention that with today’s supply chain challenges, probably the only option to access some infrastructure quickly. And most likely the only way to continue to compete in the future. For those still skeptical about security, I wonder what makes them believe on-prem is safer? Who can compete with the USD 20 billion and USD 10 billion Microsoft and Google will respectively spend on security over the next five years?
And Wall Street is not alone in moving to the public cloud. Microsoft and the London Stock Exchange Group have just signed a new deal, where Microsoft will buy a GBP 1.5 bn stack of the LSEG, LSEG is committed to spending GBP 2.3 bn at Microsoft, and both will leverage advanced technologies like machine learning and native Azure solutions to improve LSEG’s data and analytics capabilities. And more. This follows similar partnerships between Google and CME, and AWS and Nasdaq.
Author: Stéphane Rey
Brace for tough year of cost-cutting
2022 has not been the best year for asset managers, and nobody knows what 2023 will bring. Most asset managers will cut technology spending, have to focus seriously on IT investments that will move the needle, and get their acts together. While some could argue that it’s now the right time to invest in tech to become more effective and efficient. Define a realistic set of key delierables for 2023 and then focus, focus, focus!
Read the FT article Asset managers brace for tough year of cost-cutting in 2023.
Being a pure robo-advisor is not that easy
While robo-advisors have been addressing a real problem, it is challenging to be a robo-advisor only from a business perspective. Even Betterment is struggling with its USD 33.8 bn assets under management and 730’000 customers (as of March 2022). Incumbents have captured a large part of the robo-advisor business and benefits. As reported by INSIDER, Betterment “is geared toward selling retirement plans to small and mid-size businesses, and to cater to financial advisors and their wealth-management firms.”
Think like a software company
Software is eating the world (“Why software is eating the world“, Marc Andreessen, Wall Street Journal, August 20, 2011) and many companies see the importance of becoming (like) a software company. It starts with committing to a software culture through leadership, communication, and investment. Leadership: Bring tech and software experts and visionaries on board, measure specific software KPIs, get software leaders to join your board (or advisory board, or technology board, just pick one), and join some of theirs. Communication: Communicate constantly about the strategy, value proposition, and progress of software, internally and externally. Investment: Sustained investments in software are required over many years. Management must also measure employees’ satisfaction.
JPMorgan started its journey with culture and mindset, talking about business outcomes, obsession over customer experience, and delivering value faster.
Invest in empowered product managers, while driving engineering excellence through autonomous teams and flexible architecture. The quality of the product managers and their ability to steer is critical to the success of this endeavor. Build on the ecosystem, leveraging others’ platforms and offering your own platform. Bring in “citizen developers”.
Last but not least, understand how to leverage software and data, where it can make a major difference.
Two key sources:
1) “Every company is a software company: Six “must dos” to succeed“, McKinsey Quarterly, December 2022.
2) “Inside JPMorgan’s appointment of 25 “mini-CEOs” and new strategy to operate more like a startup <…>“, Business Insider, April 2022.
Digital transformation
As Ram Charan says, digital transformation is hard. Many firms have spent millions of dollars with very little result to show for it. Even defining what digital transformation is for a given industry or company is a challenging question.
The digital transformation of an asset manager must cover multiple dimensions and will evolve. It will impact the business model, client relationships, the supply chain, and the organization. Some elements of the digital transformation to consider:
- Client experience, focusing on the client, digitalizing their experience, and giving them access to data and self-servicing;
- Data, becoming a data-driven organization, leveraging new technologies like but not limited to data science, natural language processing, and artificial intelligence. For incumbents, data is often a significant challenge. There is data all over the place, with different definitions and formats, and minimal abilities to extract the value of all this data;
- Process automation, trying to achieve the highest possible straight-trough-processing level, eliminating manual work and potential errors;
- Digital disruption, identifying how Fintechs, pure digital players, and others will impact the industry, and defining required changes.
The digital transformation does not have to be a big bang. On the opposite, it should be a step-by-step approach. A company can quickly achieve results and deliver business impact by leveraging digital enablers with limited financial means. A key obstacle is often the company’s culture and mindset.
The digital transformation must come from the top (the CEO or the executive suite) and it must embark people even before it starts. Do not “outsource” your digital transformation to one individual or your IT organization. It’s a team effort that must engage people with sound business knowledge, deep operations expertise, and in-depth technology knowledge and expertise. Having the right talent is part of success. Finally, educating your senior management team about technology and digital transformation would be best.
Key to the journey is to identify the first, right step. Ensuring that it is feasible in a way it can quickly deliver business value. A good place where to start is usually the value chain. Map it, identify key pain points, and prioritize deliveries. Part of the journey is to find a pragmatic approach and not just dive into the digitalization hype.
Constantly revisit your target and the steps you are taking. If you are failing, recognize it quickly, and start again.
Recommended reading: “The digital leader“, Ram Charan and Raj B. Vattikuti, 2022.
Introduction
This blog aims to share my experience and expertise in the digital transformation of Asset Managers and Wealth Managers. To do so, I will share some of my thoughts and some content (some of this content might not be free and require a subscription).
I am currently the Chief Information Officer of Credit Suisse Asset Management. Previously, I was the Chief Technology Officer of Lombard Odier Investment Managers and a partner at McKinsey’s Business Technology Office. I have a passion for technology and how it can shape businesses. All opinions are my own.
Digital Transformation of Asset Managers and Wealth Managers 