StatPro
Neil Smyth
29 July 2015
‘The cloud’ is becoming more and more prevalent in financial services, but many still see it as just a lot of fluff. There is a silver lining, says Neil Smyth of StatPro, as long as the tech is utilised properly
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Would you consider regulation as the biggest driver of innovation in financial services?
Regulation is a big driver of innovation within financial services, but it’s definitely not alone. Asset managers are innovating with new products in an attempt to differentiate themselves in a market that’s under increasing fee and cost pressures. Financial technology itself is also driving innovation, with new digital channels opening up and new ways to manage and collaborate on the increasing amounts of data we all have to deal with. The financial services industry still needs to add transparency and to communicate with its client base better, and new technology is helping to do that.
What requirements are being made of asset mangers with regards to data and analytics? What is the role of fund administrators in this?
Data management is becoming a major task and headache to asset managers. Of course, analytics requires data but if you put poor data in, you get poor data out. Managers are being expected to provide more transparency and easier distribution of analytics. This is something most are happy and willing to do, but increasing amounts of data management tasks are holding others back. Regulations and new product innovation have added to the data mountain, so getting everything in shape for robust and adaptive analytics is a challenge.
Fund administrators can play a big role in helping overcome these challenges. They hold key elements of data for the manager already, so by adding additional analytics capabilities they can provide a more complete service to their clients rather than just data feeds. StatPro works closely with more than 30 fund administrators to help them provide portfolio analytics to their clients without having to manage an IT project or any software.
How important is it for firms to adopt new technology?
New technology isn’t a solution alone, and firms need to review processes and workflow that have been designed around legacy technology platforms. Adopting new technology should allow for new processes to be put in place to take full advantage of faster calculation speeds or enhanced collaboration and information distribution.
Many portfolio analytics systems date back to 2006—before the first iPhone—and simply cannot cope with the demands of a modern asset manager. Legacy system performance often plateaus due to dated software architecture, meaning no matter how much additional hardware is thrown at them, they simply can’t go any faster or cope with additional volume. One area of technology where performance constraints have been removed is the cloud and software-as-a-service, where true cloud-based applications are not limited in their architecture and can scale massively. These flexible and outsourced systems allow firms to focus on their core business without having to plan for IT infrastructure to meet growing application demand.
How secure is cloud-based technology? Is there a risk that sensitive information could be vulnerable to cyber-attacks?
As with any system or software application, data security can be compromised if it is poorly designed or if vulnerabilities haven’t been managed and removed. Cloud-based technology is often cited as being more insecure but this is misleading. Traditional applications are often written using out-dated development platforms and data security is something that is added at the end of the process. Cloud-based systems benefit from having data security built into their foundations using the latest technology stacks. Cloud development makes it much easier to keep up with new advances in data security methods without having to re-write the whole application.
Many software-as-a-service solutions only have a single version, meaning companies don’t get left behind on old, insecure versions of code and new releases are pushed automatically. Firms should always look for external and independent data security audits such as ISO 27001. These frameworks set best practice for software vendors to manage information security at the highest levels. External pen tests also show how an application behaves when someone tries to hack it or gain unauthorised access. These tests expose any vulnerabilities and help vendors plug security holes before any code is released.
What kind of legal challenges could firms run in to, for example, when storing cross-border assets and data?
It is important for firms to understand where their data is being stored when working with cloud-based systems. Data is often replicated to other sites for disaster recovery purposes so it’s not always a straightforward question as to where your data is located. Many cloud-based providers offer a choice of data location, so if managed properly you can ensure your data remains within legal boundaries and jurisdictions.
How should financial services companies be properly utilising the cloud, and what kind of pitfalls do they need to look out for?
Cloud computing and software-as-a-service solutions can provide many benefits to financial service companies. Speed to market, reduced running costs and enhanced client service are just some of the real business benefits that can be realised, and the risks can be reduced, too. Software-as-a-service allows firms to implement solutions without the typical large IT project management risks. One key pitfall to avoid is that of ‘cloudwash’. These are fake cloud solutions that are simply old school IT hosting systems dressed up to be cloud-based purely as a marketing strategy.
True software-as-a-service solutions should be scalable with a single version of code for all clients running across shared and scalable hardware. Upgrades should be seamless and more frequent than traditional ‘big bang’ approach software. When utilised properly, cloud computing and software-as-a-service should be an enabler for business. It should be a service that allows you to focus on core business objectives without the surrounding IT support challenges of traditional software.
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