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Enterprise-driven software program an rising pattern in asset administration

Business-oriented software is an emerging trend in wealth management

Tech-savvy asset management professionals have started developing their own software solutions – which encourages personalization but also increases risk. A study by the financial services consultancy Sionic sheds light on the compromises.

Sionic conducted a survey and conducted interviews with asset managers on the subject. It turned out that more than 90% create software solutions themselves instead of relying on the IT department. In fact, coding languages ​​are easier to use than ever (e.g., low coding) while young professionals are now familiar with programming, cloud technology, and software applications.

With these tools there is enough motivation to take control. “Part of this is due to a lack of functionality in existing applications and frustration with the speed of centralized software development,” said Clare Vincent-Silk, partner at Sionic in the UK and an asset management expert.

That being said, there’s more to it than just impatience. “The main reason is to allow for more granular data analysis and to allow investment teams to incorporate their ‘secret sauce’ into investment decision making and portfolio construction,” she added.

Unsurprisingly, investment desks are the epicenter of this “enterprise-developed IT”, though it’s also evident in the reporting, finance, and operations teams. User-friendly tools such as the Python programming language and PowerBI data visualization software are becoming increasingly popular in these companies.

Undoubtedly, the trend reflects an admirable initiative and knowledge of current trends. Data-driven asset management is widely recognized as the way forward, and many in the industry are looking to strengthen the role of technology in this area. The problem is that the IT developed by companies in its current form opens up the risks of a Pandora.

Employees who act on their own risk using vulnerable software. incorrect or unlicensed data sources; and even weak, untested, or buggy codes and algorithms that can produce inaccurate results or create security holes. To top it off, regulators are increasingly interested in testing technical maturity, which also brings compliance risks with it.

All in all, most of the companies in the Sionic survey only “tolerate” IT developed by companies, but do not support it. At the same time, companies cannot actively stop this trend – smart asset management is gaining ground every day. The solution is to develop an effective risk management framework that can support the IT developed by companies.

Risk management

Many have a rudimentary structure – 80% said employees need IT approval before they can use development tools. Much remains to be done, however. Only 10% state that they can effectively support the IT developed by companies. For Vincent-Silk, a focus on compliance is the next step forward.

“Culture plays a major role in this. Organizational awareness and approval of controls are critical to the success of the risk management framework. It does this by training capable employees about best practices and behaviors, and by building a strong culture that supports internally developed software. “

Operational risk teams will also play a key role “in ensuring that the risks posed by company-developed IT are well managed as companies increasingly rely on technology to improve investment performance for their clients and.” improve their competitiveness. “

Future of IT

With a robust framework and a risk-aware culture, corporate-developed IT could become the future of asset management. A third of those surveyed are already actively promoting this shift. The question remains: what about the IT department?

Almost 30% of those surveyed see greater decentralization of IT. Not to say that centralized IT teams become irrelevant, but only take on a completely new avatar – a “supervisory and mentoring role” according to the analysis. These teams will focus on how more advanced technologies – data science and development – can support and drive business while at the same time keeping enterprise-developed IT in check.