What are the challenges clients are facing, particularly against the backdrop of rising interest rates, inflation fears and global volatility? How is Broadridge helping businesses overcome these challenges?
There are obviously ebbs and flows in the economic landscape. Rising interest rates and inflation are definitely adding costs for clients. Whether you are a bank or an asset manager, it is getting more expensive. Technology is getting more expensive, and in many cases, they have technology that is dated, or perhaps suboptimal, because clients have a whole different spaghetti of systems in the back. Challenges the clients are facing are threefold. One is they are trying to grow their revenues and grow their businesses, and that is a very important focus for them. The second is they are trying to use technology to reduce costs, and actually have better data, so that they can make better business decisions that are more data-driven. The third, and maybe the most important thing that clients are trying to do, is to have a better experience with their clients.
Everybody wants to establish client intimacy, and to have that great client experience is really important.
Whether it is an asset manager, or a bank, or a capital markets firm, Broadridge is enabling these clients with technologies that are modern, that are going to lower their costs, give them a better risk resiliency profile, and ultimately enable them to interact with their clients in a seamless way.
Those are the things that people are worried about. Especially with rising interest rates, costs are getting higher — the labour market is definitely tighter. By using technology, clients can experience productivity gains in a far more efficient way, rather than just adding people to a specific problem. Technology is an efficiency enabler on a number of different fronts, and it can help with rising interest rates and market volatility.
With the changing investment landscape, what are the actions that asset managers can take to face these ongoing conditions and how can technology help?
Asset managers have a more specific set of problems that they are facing. The first is Assets under Management (AuM) declines or outflows. They are definitely seeing AuM outflows. For example, for the first half of last year, Asia had the largest decline in AuM in the last three or four years. If you are an asset manager, that is a big problem, because you have to have AuM to drive scale.
The second is a change in preference, in terms of what investors are investing in. Increasingly, it is an inflation hedge, but it is also a preference and pattern. They are shifting into alternatives, increasingly investing into real estate, hedge funds, private equity, and loans. Asset managers, if they were traditional long-only managers, now have to gear up for these strategies and build up their capabilities.
The third is regulatory requirements and regulatory reporting. There is harmonisation, however there are now more regulatory requirements for an asset manager. If you are selling a fund to an investor, you have to disclose information about the fund performance, the risks, and the profile — there are all these regulatory requirements, which are important, but it is not necessarily core to what they have to do, which is AuM management.
The asset management industry is therefore increasingly relying on partners to provide technology solutions, to enable them to meet the challenges of regulation and to have a better customer experience. They are using technology to lower their costs, because they need to remain profitable and keep growing their business. Asset managers are going to have to deal with this new environment.
When looking for critical technologies, businesses look to partner with companies such as Broadridge. They often say: “This is critical, but it is a non-differentiated function, so I would prefer that you run it for me, and provide it as a service.”
Broadridge’s acquisition of Broadridge Trading and Connectivity Solutions (BTCS), formerly Itiviti. What’s in store for this side of the business?
We are very optimistic about BTCS. If you look at our capital markets story, we are now very much sitting across the entire ecosystem of the trade lifecycle, from front to back. We are a key participant in that. We also have established relationships with the 25 premier investment banks around the world and sell-side firms, so we have a very solid market position.
We are about a year and a half into the acquisition. The acquisition is almost integrated and we have seen very strong results. We just had our full year results, and you will see that BTCS has contributed to our top line growth and to our margin contribution, and we are seeing great opportunities in Europe, Asia, and North America. It is all about growth; it is all about providing technology solutions across the capital market ecosystem.
Clients can now use our data models with a more consolidated and comprehensive suite of solutions across the entire ecosystem. The technology is very modular, component-based, and modern, therefore they can also benefit by replacing older architecture they may have. We are very excited about that, and we are very excited about the prospects for growth in the next couple of years.
What has been your experience regarding current industry trends and the new opportunities to leverage technology across the buy-side, sell-side and post-trade?
Broadridge provides technology solutions to buy-side clients, and they have very specific requirements. On the sell-side, and within the area of post-trade, we are a leader when it comes to fixed income, equities, and settling securities — in more than 100 different markets.
Increasingly, what is happening is the buy-side and the sell-side want to be able to exchange data and information in a more seamless way. Therefore, given our prominent position at one end and the other, we are now able to use data and data mechanisms so that clients can gather the information they need to make better decisions — to have better cost allocations and to generate more capital.
What is important here is having the two leading-edge technologies that support the buy-side and sell-side, and having the data and the connectivity between the buy- and sell-side. Using Broadridge’s front-office activity as an example, the company has approximately 800 sell-side firms and 1600 buy-side firms that are on that network of connectivity. In total we have around 2500 buy- and sell-side firms that are actually using that network, and that network effect is really what adds value to the entire ecosystem.
What has Broadridge got planned for the rest of this year?
For us, it is all about focusing on the provision of best-in-class services — which in turn drives growth across our businesses, which is what I am responsible for. There are a lot of important projects that we are carrying out for our clients — they depend on us for technology and development — it is all about making sure that we deliver for them. It is also important to mention the investments that we have been making, whether it relates to Itiviti or on the fund management side — making sure that we have integrated those people well and that they really understand the Broadridge culture, and that they are valued members of the team.
Now that things are definitely opening up after COVID-19, and travel measures are relaxing, it is all about seeing clients, meeting our staff, and engaging with people on a human level.
This years’ SIBOS theme is “Progressive finance for a changing world”. With this in mind, what technology trends do you think will be the main industry talking point in the second half of this year, particularly at SIBOS?
I think it is going to be around innovation — everything from distributed ledger technology to bots. I think that is going to be a big overarching topic. The second is going to be around technology enablement, in terms of how you get data to make decisions — getting that data is absolutely critical.
People are also very focused on the customer experience. At the end of the day you have a lot of disruptors — small, midsize fintech startups — that can easily disrupt business models. Therefore, you have to really pay attention to the customer, customer loyalty, and factors such as net promoter scores.
Looking at the conference, the agenda, and the speakers, there is a lot of discussion around technology and technology enablement, and how that is going to drive and power our businesses and business models, and perhaps even change business models. That is a very important conversation — one that we are certainly having with clients. I am glad to see that it is front and centre of SIBOS and its conference agenda.
What are you personally most looking forward to about this year’s conference?
Do not ever underestimate the power of meeting with people and connecting with people, particularly after a number of years apart. In July I was in Asia, partly for our big office opening in Singapore, where our Asian headquarters are. I have got to tell you, it is incredibly liberating to see people in person. It is great to do a video call with someone you know to stay connected — however, it is not a great way to establish new relationships. Therefore, meeting again in person is something I am very much looking forward to.
I am also looking forward to hearing Roger Burkhardt, former chief technology officer of the New York Stock Exchange, and now chief technology officer at Broadridge, speak on a panel on digital innovation. There are a number of other innovation discussions that we are either sponsoring or participating in, and again, I think innovation is going to be very important for the future.
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