In asset management, open architecture is crucial to progressing nimbly and profitably into the digital future. It is no longer an aspirational term used by the chief technology officer. Open architecture is top of mind for many C-suite executives, given its promise to positively impact the bottom line through operational efficiencies, improved service levels and expanded client offerings.
Currently, too many asset management firms are anchored to outdated technology. They’re held back by closed platforms tied to a particular vendor’s software or suite of solutions – systems that were not designed for today’s vast volumes of data.
Data challenges
Though access to data has become easier — whether in the back office, the front office, or the client’s view of investments and transactions — leveraging this data in a useful way is still a major challenge for most firms. Raw, original, and unstructured data can yield compelling information for investors, and can come from many sources.
Examples of such data include courtroom documents, patent filings, social media sentiment analysis or behavioral analysis of earnings calls. Investors can glean potentially valuable insights such as testimony that could implicate a large corporate settlement or payout; a new vertical or expanded business line based on recently filed patents; sentiment analysis from Twitter or LinkedIn posts to potentially uncover buying trends or identify new competitors; or behavioral analysis of executives on quarterly earnings calls to assess whether the company is being fully forthcoming about its business, or whether the chief executive and chief financial officer are aligned.
The goal is largely to transform this unstructured data into usable information that can support business opportunities and/or help improve investor returns.
Historically, integrating data from a vast variety of sources and vendors has been a complex and costly endeavor that relied heavily on independent third parties.
Enter: Open architecture
Open architecture platforms empower firms to capture such insights from a wide variety of data sources and vendors, and easily and securely process that information so that firms can compile, analyze and share meaningful insights with stakeholders in a timely manner. Though the potential benefits of this model are clear, the motivations and pathways can vary. The migration to an open architecture platform can sometimes be driven by the desire to improve efficiencies within the business or to improve the client experience.
Open architecture in action
One example is a large fund manager who decided to leverage the open architecture model. The firm wanted to off er a compelling alternative to the plethora of ‘passive investments’ in the market and to meet client demand for more complex data driven investment options. The fund manager also wanted to do it in a way that would reduce management and operating costs, without compromising client service.
By leveraging an open architecture platform, the manager achieved greater efficiencies – while making the data more visible and usable for its investor- facing trade processing, fund accounting and administrative activities. And even as it streamlined operations, the firm was able to off er its clients more complex investing options.
These days, of course, investment managers operate in a broad ecosystem that require them, and their customers, to be able to interconnect with a variety of partners. Open architecture makes such opportunities possible, and has led to collaborative efforts such as our alliance with BlackRock to enable our mutual clients to integrate access to the services and data our clients need to work effectively, allowing for closer data integration and greater transparency and insights. This is just one example of a number of collaborative efforts taking place in the industry.
One step ahead
Open architecture makes it possible to have access to a broader array of today’s digital technologies. It provides investors and portfolio managers with a complete view of their investments. And, ideally, it’s a way to help asset management firms to turn a potentially overwhelming deluge of unstructured data into timely, valuable and actionable information— well before others have the opportunity to aggregate and analyze it.
Allen Cohen is digital officer and head of global fund services products at BNY Mellon.
