Stig Olsen, Senior Director of EMEA and APAC regions at SS&C Advent, explains in this exclusive interview why wealth managers are increasingly deciding they can no longer live with the barriers legacy technology systems create – and why a brave band of firms are embracing radical change. Part of our "Technology Traps" series.
(For an overview of our new report on Technology Traps, see here.)
One phrase dominates the discussion as wealth managers accelerate their digitisation in a bid to capture vital client experience and efficiency gains: legacy issues. It has, in fact, for years and still all but the newest firms - or those that have made bold modernisation moves - are struggling with legacy technology to some extent.
Yet change is in the air, according to SS&C Advent’s Stig Olsen, who sees attention now really turning to the question, “What do we do to really solve this issue definitively?” For a growing band of firms, putting real change off is no longer an option.
Impetus is coming from a dawning realisation of the true cost of legacy technology, it having a deleterious impact on so many areas of performance. Crucially, outmoded technology is a serious barrier to developing the leading client offerings firms need to compete. The fact that relationships increasingly play out in the digital sphere has dramatically raised clients’ data expectations and this, Olsen observes, is where legacy technology is making many firms fall down.
He explains: “Clients want access to ever more data that’s flawlessly correct, and they want it in real-time. Accuracy and speed both need to be in sync, but unfortunately legacy systems often stand in the way.
“Delivering data from your core systems faster than competitors is no advantage if it’s often wrong; similarly, delivering correct data painfully slowly leaves you far behind the premium offerings out there.”
The realities of real-time data
Moving from batch to real-time data has made clear to many firms just how difficult data extraction can be when working off a patchwork of legacy and bolt-on systems (possibly from an array of vendors). In a sector marked by a frenetic pace of change across regulation, M&A and technology, this is of course very often the case.
Just as significantly, demand for real-time data means that manual interventions can no long provide cover for systemic flaws. “Previously, inefficient processes or legacy technology could be hidden by having a team of 50 people working behind the scenes to generate monthly client reports,” Olsen says. “But now the expectation is for instant access to portfolio information, you can’t hide anymore.”
On top of this is the requirement to slash the burden on staff so they can focus on higher-value tasks, rather than be mired in manual workarounds as operational costs continue to bite – a need that will be particularly pronounced where compensation and competition for talent are rising.
Olsen further notes that only by resolving legacy issues can the industry unlock the opportunities for self-service it should pursue. “The sector is recognising that some elements of self-service might be foundational to delivering a great client experience by modern standards,” he says. “Moving select processes from the back-office to self-service can result in smoother, better service as well as compelling efficiencies, and so be a big win-win.”
The quest for true interoperability and efficient dataflows between multiple systems means APIs (Application Programming Interfaces) have become a crucial area of development, and adoption is expected to rocket in the next five years as the industry targets greater personalisation and automation. “However rich your data, it won’t help your clients if it’s inaccessible,” Olsen explains. “The availability of APIs - and therefore how efficiently you can get data out of your systems - dictates how achievable a premium offering is.”
As he emphasises, automation in client reporting is a case in point, with advisors still often battling spreadsheets and a mix of systems that don’t “talk” to each other to create and validate static reports; whereas real-time, client-configurable access to immaculate portfolio information is increasingly “table stakes”.
Correspondingly, Olsen cautions that all automation efforts need to be built on rock-solid data foundations - lest manual work merely shifts focus, rather than being removed. “If you reduce manual input but have to spend that saved time on quality control and reconciling data, then you’ve gained nothing,” he points out.