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CEO Insights

Ditching the status quo

The more I watch the RegTech revolution take off, the more I’m convinced our industry is having its Travelocity watershed moment. Let me explain. 

Think about what the role of a travel agent was 20 years ago. Before the internet, you went to an agent to find the best flight and hotel deals for whatever trip you were about to take. You didn’t turn to Google; you sat down in an office and chatted with an agent who did the legwork for you. 

Then, it happened: technology disrupted this process. Online travel booking websites like Priceline.com, Expedia and Travelocity came along and offered a far more effective way to make travel arrangements.

Fast forward to today, and the travel agent’s role is very different. Today’s agents are leveraging the technology that threatened to displace them and redefining their role to focus on providing a better customer experience. Their new role is about planning vacations down to the last detail, digging up better bargains than anyone else and making sure the experience is the best it can be. Delayed flight? No problem, they’ll let us know, and they’ll handle the rescheduling. Did the day at Disney get rained out? Don’t worry, the travel agent will send us an itinerary for Plan B and even snag a dinner reservation close to the new destination.

Online travel sites could have meant that travel agents were going the way of the dodo bird. But instead of competing with new technology in areas where that technology was superior, they decided to use that technology to do their old job faster, spending newly freed bandwidth to add value in other ways. 

In our industry, RegTech offers us a similar opportunity. New technologies are now able to do many of the things that our back-office workers have historically been tasked with doing – data collection, reconciliation, analysis, formatting, distribution; it’s all becoming automated.

I certainly don’t see back-office workers going away any time soon. Actually, I predict the opposite will be true. We have an opportunity to elevate the value of their contributions. New technologies are letting us re-envision and redefine their roles in the back office.

This is probably the most overlooked detail in the rapid rise of RegTech: it’s not just for addressing regulatory issues. Fund administrators are identifying all types of adjacent business needs that these solutions can address for them, from increasing transparency and engagement with investors, to providing deeper business insights to the front office. As I think about this opportunity, I imagine three levels of data management sophistication evolving.

At a minimum, the information that’s required by regulators can be produced within the window that it is required. The reporting process consumes a lot of resources, requires repeated actions each reporting period and involves frequent manual intervention – but it gets done on time.

As RegTech delivers even greater sophistication to the back office, those same regulatory reports can be produced any day of the week and at any frequency with little manual intervention. Running the reports is no longer an arduous, difficult task. It’s something that can be done easily and quickly.

When RegTech reaches optimisation, things start to get interesting. Now, the back office is beginning to develop the ability to analyse all that regulatory data and provide real-time insights to the front office, or even clients, when the business begins to move in a problematic direction.  Back-office workers have the tools to elevate their game and their value to the fund enterprise.

This is where back-office work gets fun.

Take Form N-PORT reports for risk metric calculations, for example. What if we had the ability to run them each day to get a snapshot of risk? One day, you see that the asset prices in a particular portfolio are moving in a direction where the fund’s exposure isn’t looking so good. So instead of figuring this out at the end of the reporting cycle, you’re able to say to the front office: “Hey, something is not looking right here. Let’s see what we can do about this now.”

This predictive ability is changing the way firms are thinking about managing their business. Traditionally, people haven’t looked at their organisation and said: “What can I do to overhaul the way we think about data and information across our business lines?” Instead, the industry sought incremental change.

That mentality is going away.  Disruption is becoming a common (and positive) theme. RegTech is playing a central role in the shift. Our industry is beginning to realise that what’s important in the regulatory realm – greater transparency, lower risk, less manual intervention – is also important to the business.

We’re embracing RegTech as a tipping point for real transformation, as opposed to seeing it as just another thing we’ve got to manage to look after.  I think people genuinely feel like we’re only beginning to scratch the surface with what RegTech can deliver. The back office quite literally could be building the foundation of an entirely new, data-driven operating model for the asset management industry.

So, move over status quo. RegTech is changing the game.

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