BNY Mellon’s Roman Regelman discusses some of the bold steps providers should take to lead the transformation of the asset servicing industry
A new world of integrated platforms, transparency and technology has radically altered what is possible. With industry forces and current economic conditions weighing on asset managers and asset owners (already under significant pressure before COVID-19), the stakes now could not be higher. The question asset managers and asset owners should be asking themselves is to what extent are they ready for the future.
The answer depends on how ready their providers are. To deliver what’s needed requires taking a different approach from the past, as well as a digital- and data-driven mindset and skillset. Providers must have the foresight and the talent, the infrastructure and the technological savvy. They’re expanding beyond the traditional role of supporting operations to revolutionise the front, middle and back office. They look to marshal data for competitive advantage — to help more meaningfully gather assets, improve investment performance, access liquidity pools and other imperatives.
I’ll share what we are seeing and hearing from our unique vantage point of serving many of the world’s financial leaders, and discuss some of the bold steps providers should take to lead the transformation of the asset servicing industry.
Becoming orchestrators
The traditional role asset servicers have played in supporting operations is important to our clients. But it addresses only a small part of their needs.
Asset managers and asset owners are increasingly focused on managing and using data to drive competitive advantages that can offset fee and cost pressures. They also recognise the importance of improving the end-investor experience and addressing investors’ demand for increased transparency. It’s becoming clear that no single provider can deliver everything clients need while offering adequate choice and flexibility.
Asset servicing businesses must therefore become orchestrators of solutions and of information across investment processes. This could mean bringing together disparate data, and delivering modular and flexible solutions that enable clients to adapt, tailor or transform their businesses according to their priorities and needs.
Fundamentally, asset managers are looking for solutions across the investment continuum. They’re looking for those solutions to be connected by data. And they’re looking for choice, as clients all have different comfort levels regarding the components of technology and architecture they want to own or outsource. They expect that underpinning it all is a resilient, frictionless, operating model that lets them focus on their growth and serving their clients.
BNY Mellon OMNI is a great example of what the future can look like. It is an interconnected global network that brings together leading solutions and tools across the investment process. Clients can access them in a streamlined, frictionless, fully integrated ecosystem that includes our partners and parts of BNY Mellon beyond asset servicing. OMNI helps our clients power their growth through distribution, data and analytics; increase efficiency and resiliency; and drive agility so that clients use optimal technology and can act nimbly in an ever-changing landscape.
Data as a competitive advantage
Data is a vital asset class for our clients. For many investment organisations, however, it’s challenging to get to the point at which the realised value of data lives up to its promise.
They lack the infrastructure and associated services that empower organisations to use data for competitive gains, and the underlying framework and tools for acquiring, analysing and managing data.
BNY Mellon has the advantage of having delivered client-centric data solutions to the market for more than 25 years through the Eagle software platform, which provides portfolio management, data management, investment accounting and performance measurement.
Last year, we combined the capabilities and resources of our Eagle product suite with a host of new and existing talent across the organisation, and created a new service with an expanded set of products known as data and analytics solutions.
Operating with the skill and agility of a fintech, data and analytics solutions is a powerful software and content offering built upon an open ecosystem. This structure enables us to collaborate with leading technology providers and equip our clients with tools for using data in the front, middle and back offices.
Clients looking to seamlessly integrate and process data will be leveraging our new Data Vault platform. One client adopting the platform is a large investment management firm on the lookout to buy smaller firms. Vault will allow them to store and access all their data — whether accounting, sales and marketing, advisory — in one place. BNY Mellon is helping them power a circle of capabilities that not only gives them tremendous operational leverage, but also an advantage in an ever-complex marketplace.
Open to more connections
Many firms engage in the same markets, but their strategies and needs reflect bespoke objectives. Innovation comes from many places, and no one firm will ever have a monopoly on good ideas. The implication for asset servicing is simple: Optionality is essential to success, but it can’t come at the expense of efficiency. Clients need an open, flexible and modular platform that creates scale, while making it easier to incorporate a broad range of innovation across their investment lifecycle.
We were a pioneer in our open-architecture approach, and it’s enabling us to engineer high-quality solutions for our clients while preserving client choice and independence. BNY Mellon OMNI allows clients to change their providers in an accessible and non-disruptive manner. For example, we have guided some of our asset manager clients through system consolidations where they were able to pick and choose the technology that best suits their go-forward strategy.
Our collaboration with Milestone Group has launched an innovative new suite of oversight and contingent net asset value (NAV) calculation solutions. By joining forces with BlackRock’s Aladdin platform, Bloomberg and SimCorp Dimension, we enabled clients to select best-in-class tools to create a streamlined, frictionless, fully integrated ecosystem so they can invest and operate smarter. We are also joining with other industry players to address persistent pain points, such as proxy voting. This is the orchestrator role in action.
Digital opens new possibilities
Expect more standardisation and outsourcing. For instance, contrast the standardised accounting in the mutual funds industry with, say, private equity administration.
Not nearly as much is outsourced in private equity because there aren’t as many standards and rules governing it. The same goes for asset servicing. Do managers think trading is an essential part of their alpha strategy? They don’t. It’s now a standardised, rules-based function and ripe for digitisation.
When an organisation understands the complex challenges facing its clients, it can digitise just about everything. If COVID-19 reinforced anything, it is the critical need to digitise every process and interaction. It happened in custody years ago, and it happened in accounting. We see digitisation transforming administration today. Going forward, we’ll see just about every part of what was once in the realm of bespoke client service become automated.
A defining characteristic of the revolution underway in capital markets is the digitisation of everything. The algorithmic investing of beta and index products continues to be enormously popular. Even client sales and client service are benefiting from machines. We’re implementing Microsoft Dynamics 365 as an end-to-end platform on which we automate inquiry routing and response, and incorporate machine learning and eventually AI, to facilitate better decision-making. We use this information to improve existing solutions and develop new products to address client needs.
Distribution is perhaps the most noteworthy function to be transformed by digitisation. BNY Mellon is reconfiguring our business in order to leverage our unique position across services and clients. For example, we’re taking state pensions, health savings accounts and other personal savings programmes and integrating them with back-office administration and intermediary analytics.
We are also taking advantage of machine learning to help asset managers better understand predictive market demand drivers and sales momentum for mutual funds and exchange-traded funds in the US so they can gauge how to successfully gain market share.
Digitisation also provides us a great opportunity to develop our talent by challenging them to take the organisation forward.
Our culture evolves
At BNY Mellon, we recognise that we’re no longer a core back-office operations provider. That era is over. That’s why we’re stretching ourselves to think bigger and become more creative, agile, digital and innovative. We also have what pure-play disruptors don’t: a truly diverse, global team. In addition to all the other advantages, when it comes to innovation, a diverse team will typically have a higher awareness of bias issues and an inclusive perspective — which avoids building bias into algorithms.
Earlier this year we combined our asset servicing business with our digital organisation, setting the direction for BNY Mellon’s digital future. This infusion of talent and expertise is accelerating the business’ digital and data transformation, preparing it to be future-ready and positioned to support clients’ changing priorities and needs.
BNY Mellon knows that openness and a new focus on data will help us become even more relevant and impactful to the front offices of our clients. We’ve made strong progress on our mission to digitise our company — with even more exciting developments on the way.
As a company we have become even sharper, more systematic and data-driven, enabling the advancement of our asset servicing business.
Become future ready
In this new world, every asset manager and asset owner faces a choice: choose a provider equipped to be that digital orchestrator, to support choice and flexibility, and to leverage data as a competitive advantage — or be left behind. I would encourage asset managers and owners to pose these questions:
- What does it take to transform every aspect of the business to succeed in a new digital reality?
- How much time does the business spend trying to integrate the front, middle and back offices?
- As the volume and scope of data continues to swell, is the business equipped to handle it?
At BNY Mellon, those questions are guiding our transformation. We’ve adapted our services and solutions so that our clients can thrive in an environment where the distinctions between office functions haven’t just blurred; they’ve vanished.
There is no longer any need to compromise between asset servicing functions that are efficient and those that are resilient.
Clients can and will have both.
