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CEO Insights

Thank You RegTech for Triggering Change

It's about time. Our clients have been struggling to prioritize the merits of abandoning their macro-intensive spreadsheets in favor of automated solutions as far back as I can remember. While all seemed to agree that automation would result in much-needed efficiency and control, adoption of automation was slow. There just wasn't a sense of urgency. Until now.

Thank you RegTech for triggering a necessary and long-overdue transformation of the asset management back office. With you as the agent for change, I have faith that the vision that embodies Confluence of instantaneously transforming data into knowledge and delivering it to the world is on a path to becoming reality.

RegTech, while still in its infancy, has quickly captured the hearts and minds of the industry. During the last 12 months, we've seen our clients begin to think about regulatory compliance and reporting in a much different way. Rather than seeing it as a burden that consumes an increasing number of resources while delivering perpetually diminishing value to the business, the visionaries are embracing it as an opportunity to elevate their game. We are hearing some really big institutions and technology investors saying, "Look, we get it. It's time to change."

In the last several years, regulators have been pushing for one thing, transparency -- and more of it. Whether you are talking money market funds, products that exist in the alternative world, or the myriad of other types of funds, structural requirements for regulatory and statutory reporting are converging. The rapidly approaching SEC Modernization mandate may just be the straw that broke the camel's back. The industry can no longer treat data and reporting as business as usual.

So not surprisingly, firms have begun prioritizing the modernization of their back offices and allocating budget to make real changes. For the first time that I can remember, firms are thinking about how investments in the back office can improve their overall business and operating model. Who would have imagined a back-office administrator voluntarily striving to turn a 30-day reporting requirement into a five-day job? In other words, firms are looking to simplify the back office, to declutter it. The motivation is purely focused on improving the business, rather than reacting to new regulations. For the record, let me say that it's long overdue.

A few years back author Marie Kondo triggered a craze with her book The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing. Kondo told readers the way to declutter was to hold an object, and if it didn't bring them joy, get rid of it. For back-office professionals, that same advice applies today. You've got take this moment as an opportunity to hold your technologies in your hands and see if they bring you joy. If they don't, this is your opportunity to throw them out.

Or, watch a couple of episodes of "Hoarders." It'll have the same effect.

And out of the vacuum enters RegTech. In the year ahead, our industry will start to see the first real benefits that RegTech can deliver, which will speed up the drive to declutter the back office. This is a goal we've been championing for more than two decades.

I'd be remiss to point out that all regulatory technology isn't RegTech. To lay claim as a RegTech brand, regulatory technology must be adaptable, scalable, transparent and most importantly, actionable.

RegTech solutions must be adaptable. They must be pragmatic. These solutions are running in a complicated environment. They have to be prescriptive enough to meet regulatory obligations, but they can't be so prescriptive that they require an army of developers to accommodate a little change in the rules. Right now, most reporting systems, whether proprietary or off the shelf, need a horde of code writers to shift even a little bit.

RegTech solutions must be completely scalable. They must be able to handle the small things and the big things, do a little and do a lot. Scalability is all about future-proofing your business. RegTech solutions have to be future proofed. And we have to be honest with ourselves, right now, for the majority of firms, their technology is nowhere near future proofed. That needs to change, and RegTech will be the catalyst. We have the opportunity to bring some real systemic improvements to our organizations. And it's time to do it. No more waiting.

RegTech solutions need to be transparent as well as facilitate business transparency. Transparency is one of those words that gets tossed around by everyone, and it means something different nearly every time they float the word. For RegTech, transparency means two things: enabling asset managers to provide increased information transparency to regulators and investors. In terms of transparent technology, which RegTech solutions are, it simply means they are easy to use. It seems so simple, but the vast majority of solutions out there right now are simply not easy to use. RegTech is changing that.

Finally, RegTech solutions need to deliver actionable results. That's the name of the game. If the solution doesn't deliver insights that the business can act on, it ain't RegTech. The back office has historically played an accounting role, churning out reports about things that happened anywhere from a month to a year ago. That's unacceptable, information is only as good as it is actionable. Enter RegTech.

And that's just the start.

While the back office has always played an important role, let's be honest, the information in the hands of the back office has been grossly underutilized by the industry. RegTech promises to change that. These solutions have the ability to transform information into knowledge that the business can apply in real-time. Instead of serving up data every 30 days, RegTech will give you the ability to know and correct for emerging business risks in real-time, whether it's share flow information, price changes or other risk shifts.

Ultimately, RegTech is the beginning of our industry taking a quantitative approach to managing everything that happens post-trade. My bet is that this transformation will be among the most meaningful and beneficial changes our industry has ever undergone.

This is going to be good.