The Development of Smart, Intelligent Platforms

Date: May 4, 2017

Many asset managers are also starting to take advantage of the development of smart technology solutions when it comes to performance measurement and analysis by their middle offices.”

The rapid pace of technological development in areas like artificial intelligence and robotics is certainly capturing the public’s imagination at present. A string of recent studies have highlighted the societal and workforce changes that are expected to take place over the next few decades as the ability of computer systems to learn and effectively think for themselves increases.

In February, advisory firm PWC published a report which found that 52% of CEOs around the world say they are “exploring the potential benefits of humans and machines working together”, while 39% are already looking at how advances in AI could shape their companies’ demand for skilled workers in the future.

As might be expected, a lot of the media coverage following this report talked excitedly of the “rise of the robots” and the threat to current jobs that new technology could pose. Many news reports focused on PWC’s estimate that automation could replace as high a proportion as 38% of US jobs within 20 years (the equivalent figure for the UK was 30%, Germany 35% and for Japan 21%).

Working harmoniously with technology

But over the course of the last two centuries or so, the world’s major economies have demonstrated that they are more than capable of absorbing major technological upheavals, from the spinning jenny through Henry Ford’s mass-production assembly lines to the rise of the internet and the World Wide Web.

Thus far, most of the debate around how smart technology can benefit industry has centred on sectors like manufacturing and transport. But there are also significant implications for areas such as financial services: according to KPMG, for example, such software already has the capability to play an increasingly prominent role in carrying out relatively complicated tasks.

Writing on, KPMG’s Bill Cline says that a process known as robotic or cognitive automation has the potential to replace three-quarters of currently outsourced financial service jobs by the early 2030s. Cline explains: “Companies can now install advanced software to perform complex financial tasks better and cheaper than people. Companies that use robotic automation could cut costs by up to 75%. Not only that, but they would gain a competitive advantage by being faster and more accurate than firms that still use people for the same tasks.”

However, he adds: “Most of the financial industry has done little or nothing to take advantage of the new technology.” This is partly due to the fact that much of the technology in question is relatively new; but Cline also points to companies’ reluctance to replace legacy computer systems that they may have spent large sums of money on, and which may have been customized painstakingly to suit the business’s specific requirements over a period of several years.

Smart technology and asset managers

KPMG’s focus has been primarily on financial services tasks that are typically carried out by the back office, and which in recent years have increasingly been outsourced to workers in developing nations by companies based in the West. But many asset managers are also starting to take advantage of the development of smart technology solutions when it comes to performance measurement and analysis by their middle offices.

Here, new intelligent systems are not explicitly designed to take over human roles: rather, they are intended to replace or upgrade the legacy platforms which have been responsible for running calculations up until this point. But the greater accuracy, flexibility and capability of such software does have the happy side-effect of freeing up analysts’ time to devote to other, more valuable or profitable activities.

One of the biggest problems with legacy performance-measurement systems is that they are hard to keep up to date: as the type of calculations required by fund managers become increasingly sophisticated, the risk that older systems end up generating incorrect, inconsistent or otherwise abnormal returns rises.

For middle offices, this has meant that manual workarounds – where calculations need to be suspended while analysts make on-the-spot data corrections – have become a fact of life, delaying reports and acting as a drain on staff time and the business’s resources.

For the middle office, smart performance management systems have the capacity to deal with a host of complex scenarios that in the past would have caused serious headaches: for example, intelligent software can identify abnormal returns and deal with them in a way that can be set out in advance by the analyst, and adjusted from portfolio to portfolio or even from asset to asset.

Such systems can effectively be trained to spot potential issues, and then either flag them up to analysts or address them according to specific rules – with the net result that no time is wasted and the absolute minimum of manual intervention is necessary.

To echo Cline’s point about competitive advantage, firms which fail to exploit these advances in performance measurement technology and which cling to legacy systems will only increase the risk of being left behind by their rivals.


• Recent reports have highlighted the potential for artificial intelligence and smart computer systems to automate many of today’s roles in the workforce.

• The potential for automation is thought greatest in industries such as manufacturing, but there is scope for financial services firms to benefit as well.

• Smart performance measurement technology may not replace human roles, but it can help free up middle-office time and resources that can be used to benefit the business in other ways.

• Companies which do not take advantage of the latest technological developments risk being left behind by their competitors.

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