This is the second half of a two-part item on how a firm in the fintech space says it has the solutions wealth management needs to handle real-world challenges.

In the second part of an exclusive interview, senior executives at JHC Systems, the providers of the FIGARO investment management platform, explain how their software developments are addressing the most pressing problems facing wealth managers today. (To read Part 1, click here.)

Economies of scale
Technology can deliver many benefits for wealth managers, in particular by helping to improve margins through reducing operating expenses, according to John Blackman, chief executive of JHC. In terms of cost-savings, he highlighted the fact that FIGARO allows firms to aggregate all orders so that far fewer market executions take place overall. He also noted that although wealth managers might like to apply sophisticated, third-party risk analyses to portfolios this can become very expensive – but not if the overarching models are analysed and the portfolios then re-aligned back to these, rather than being examined individually. 

“This approach saves firms a lot of time, money and effort,” Blackman said, adding that facilitating efficient third-party partnerships and the modular adoption of JHC’s systems has been a real priority. “A big part of Element’s development was building an API layer which enables our clients to get in and out of their data much more easily,” he said, touching on another of the industry’s hottest technology themes. 

Blackman highlighted the benefits an industrial-strength asset management platform like FIGARO can deliver for firms focusing on centralised investment propositions. Not only can the system rebalance more than 50,000 portfolios with ease, the process runs in the background so that advisors can continue with their work as normal.  

As Blackman explained, JHC’s mission is to help investment managers provide a better service while also making their lives substantially easier. The firm’s new software focuses on presenting client and portfolio data clearly in a single view so that advisors can adroitly answer any questions from clients – or indeed from compliance officers - and which really fits with the realities (and perhaps worries) of managing a large number of clients. At-a-glance analytics and mobile capabilities are therefore key. 

“Element products have been developed from the outset to be accessible anywhere, anytime. Investment managers on the go can view a summary of all of the portfolios they are managing, see the underlying performance and risk, and be alerted to key actions or events,” said Blackman. “If they are out of the office and want to know everything is OK, they have a tell-at-a-glance dashboard showing the latest positions and highlighting any anomalies”.

Time-pressed investment managers also need help with keeping track of all cash and stock movements in and out of a large number of portfolios. “Investment managers also have to worry about dividends and investing any cash that might arrive unexpectedly,” he said. Equally FIGARO’s monitoring will also alert investment managers to a shortage of cash. “The monitoring system isn’t just scrutinising holdings, it is checking to ensure that portfolios have enough cash projected to cover fees and income payments. It will then proactively prompt investment managers to address any possible shortfalls that might develop into problems with clients,” Blackman continued.  

JHC has a deep understanding of the investment manager’s workflow and what is important to them. The firm is focusing on the time savings that can be achieved through automation. One example cited by Blackman which will no doubt resonate strongly with UK advisors is the traditional scramble at the end of the tax year to use up ISA allowances. “Investment managers used to have to raise £15,000 every year on every single portfolio to reinvest into the ISA, but we’ve automated that within the rebalancing so that instruments are automatically allocated to the most appropriate account,” he said. “So, if you have high income-bearing instruments within a portfolio the system will put those into their ISA to reduce the client’s tax burden.”

JHC is clearly paying attention to the “nuts and bolts” of investment management, taking account of innovations like mobile capabilities, and opening up its database through the development of new APIs. The underlying drive is to help wealth managers eradicate those inefficiencies - large and small - that can hamper their ability to achieve increased profitability through scale. 

JHC is investing heavily in R&D, putting almost a fifth of its annual turnover into developing new products and features for its software. “We have a long-term view of life; not many firms in our space would be reinvesting the same proportion as we do in our products,” said Blackman. 

Cannily, the firm is also working through its research and thought-leadership programme to firstly highlight the extent of the inefficiencies some institutions are labouring under and then to underscore just how many of these might constitute “low-hanging fruit” easily tackled by technology – rather than just being an unfortunate fact of life. “There are plenty of areas where software can help investment managers to become more effective and efficient,” said Steve Smith, product manager for FIGARO. “Some of these areas are just accepted as ‘the way we have always done things’, whereas an objective view can highlight those difficult and long-winded processes that technology could easily replace.” 

So, while the term “solution” is hard to escape in the world of wealth management technology, it is clear that JHC leads those providers committed to identifying and tackling the industry’s most pressing problems systematically – and is willing to invest a significant proportion of its own profits alongside leveraging its industry expertise to fulfil that promise. 

Editor’s note: John Blackman, chief executive of JHC, will be speaking at the WealthBriefing Operational Strategy Summit on 1 October 2015. To register to attend,click here.