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Have you outgrown your portfolio management system?


Seven Sure Signs – If your system is falling behind, your business will follow, says Advent Software, a provider of portfolio management and accounting systems, straight through processing, trade order management software and research management software.

Technology has empowered the investment management industry to grow exponentially over the last 30 years. But with that growth has come enormous complexity – a proliferation of instruments, 24hour trading, accelerated settlement cycles, worldwide variations in accounting standards, tighter and often confusing regulations, security issues, more competition, and higher expectations among investors. On top of all that, the technology itself keeps changing, with ever increasing processing capacity and speeds.

Given the pace of change, it is not surprising that some portfolio management systems simply can’t keep up. Firms might tweak them to extend their useful life by degrees, but they do so at their own peril. Lagging system performance sharply undermines a firm’s ability to perform its fiduciary duties and may mean missed market opportunities. Firms that cannot manage increasing complexity face the risk, today more than ever, of falling behind before they know it.

It is not unusual to find that your core technology platform is no longer capable of doing everything you ask of it. But its demise should not come as a surprise. The time to ask yourself

if your system has the flexibility and scalability to support your business as it grows is well before you need to. In the next few pages are seven sure signs that tell you when you have outgrown your system.

1. You are still using spreadsheets.

An alarming number of fast-growing, established firms still rely on ad hoc, homegrown spreadsheet-based systems. It’s understandable for firms that are just starting out, with a small staff, a modest budget, a handful of clients and a narrow range of assets. But as your business builds up, you will quickly reach the limitations of what spreadsheets can do.
Relying on spreadsheets to handle a growing volume of assets, trades and portfolios runs enormous risks. Data must be updated manually. Exchanging information between, for example,

portfolio management and trading requires exhaustive manual rekeying and is fraught with the risk of errors and inconsistencies. Searching and retrieving data is laborious and time consuming. Above all, a spreadsheet-based system won’t stand up to regulatory scrutiny or investor due diligence. Some of the world’s largest banks have paid hefty fines for errors caused by tracking trades and positions in spreadsheets. Clients today will expect even smaller firms to have the same sophisticated reporting capabilities as established firms.

Even cost-conscious startups need to be thinking not merely about getting off the ground, but where they want to be two or three years from now. Deferring the investment in a proper system could prove costly very quickly. Suffice to say that if you have any ambition to grow at all—and who doesn’t?—then the sooner you move from spreadsheets and manual processes to an automated, purpose-built platform, the better for you and your clients.

2. You are having performance issues due to volume overload.

So you graduated from spreadsheets long ago and you have a system that has worked fine up until now. But lately its become sluggish, doing routine tasks more slowly, perhaps even crashing, causing unacceptable downtime and raising your operational risk. Are IT consultants spending more time on your system than your staff? Unfortunately, the software was not designed in a way that makes it scalable.

Scalability refers to the capacity of a system to take on larger amounts of data and process an increasing volume of transactions without diminishing processing speeds or system performance. It is what enables each portfolio manager to manage multiple portfolios efficiently and accurately, and allows multiple users to use the system simultaneously. In simulation testing, the best performing systems on the market have been found to accommodate as many as 200 concurrent users and 100,000 portfolios with no discernible drop in performance. While you may never approach that kind of volume, a system with virtually unlimited scalability greatly reduces your operational risk and enhances your ability to keep pace with a fast-moving market.

3. You cannot take on more clients and assets without adding staff.

Another virtue of scalability is that it enables the same number of people to handle a growing volume of work. Even such routine tasks as setting up new accounts or producing client reports can become huge drains on time and staff efficiency if left to manual processes. Instead of throwing people at the problem, you need a system that makes it easy to get new clients up and running and get their assets invested quickly.

Of course, a portfolio management system is never a driver of growth—that is your firm’s own combination of investment success, marketing and client relationship skills. Without a system that can accommodate growth, however, those attributes may well be wasted. Ultimately, the ability to increase your client base, assets and fees without increasing headcount pays off in greater profitability.

4. You lack integration, or can’t achieve it easily.

You depend on other systems in your investment process as well as in the everyday running of your business. Can your portfolio management system communicate and share data with other systems seamlessly? Having to reenter data from one system to another is a drag on efficiency and raises the risk of errors. And if integration requires an extraordinary feat of engineering, with the results falling short of expectations, you may not be much better off. True integration is not a matter of simply connecting systems, but enabling them to “talk” to each other.

It is not uncommon to find firms that spread their portfolio management activity among multiple systems— one for accounting, one (or more) for reporting, still another for reconciliation and a separate system for managing client information. Firms may also find they need multiple systems because their core system does not support all the asset classes in which they trade, or may wish to in the future. If all those systems come from different companies, getting them to talk to each other could be a frustrating exercise.

If you have an inordinate number of manual or offline workarounds, or portfolios residing outside of your core system, it is time to rethink your core system. The point of your system is to centralise and standardise portfolio management activity and data. You need an end-to-end portfolio management solution that can consolidate the work of multiple systems into a single platform, built on an open architecture that allows for easy integration with other systems, whether from the same provider, a third party, or even built in-house. Ease of integration enables you to reduce your technology footprint while driving greater efficiency.

5. You are overly reliant on your provider’s programmers.

The extreme opposite of a system that lacks sophistication is one that is too sophisticated—so much so, in fact, that making a minor workflow change or creating a new report requires a visit from an engineer. Firms are often hesitant to make changes they need to make simply because it is a time drain and potentially costly.

Your system should be serving your needs, not the other way around. It should be sufficiently intuitive and user-friendly that a business user can troubleshoot problems or change certain configurations. And your provider should be able to resolve issues or respond to your requests with a phone call.

6. You are unprepared for a regulatory request or exam.

If the regulators called you today, how quickly would you be able to prepare the documentation they require? An unexpected demand or regulatory exam is never a pleasant experience—but it will be worse if your data is not clearly organized and readily accessible. It can be a major disruption to your business, with hours of staff time spent searching, finding and compiling the required data. Even routine regulatory reporting can be a burden if you have to compile reports manually.

Compliance experts advise that the best way to prepare for a regulatory request or exam is simply to be prepared at all times. Part of that is having the information the regulators require organized and easy to retrieve. The right portfolio management system should give you the
flexibility and transparency to support everyday compliance and enable you to respond quickly and thoroughly to the regulators. Don’t wait for the knock on the door.

7. You are not getting the support, service or functional enhancements you expect.

As much as the product, you also need to be looking at your provider. Are they still paying attention to you after the sale? Do they provide adequate training and 24/7 support? Do they have a track record of continuous product improvement, and a clear roadmap for future enhancements? Are they listening to your issues or your ideas?

If you want to be sure your next system is your last, you also need to be sure the provider will be there to support you for the long term. The right combination is a flexible, highly scalable, open technology platform, backed by a solid company that stands by its clients. You need a provider that not only helps you get up and running but stays with you to make sure you get the best performance from the system with minimal disruption or downtime. It’s a twoway, ongoing relationship. You’ll want people who respond to your needs, resolve issues quickly, keep you informed and make it easy for you to adopt new functionality as it becomes available.

An investment in growth.

The portfolio management system is the hub of your business. Replacing it has been likened to a heart transplant. Yet like a weak heart, a weak system puts the health of your business at serious risk, and the time to address it is before it fails completely.

Technology is an investment. It should pay dividends in the form of greater efficiency, reduced risks, and the ability to make better informed decisions based on data you can trust. As with any investment, the choice of a platform and a provider warrants extensive due diligence. Look for qualities that assure reliable system performance now and in the future—scalability, flexibility, ease of integration and configuration, and compatibility with third-party systems. Look as well for a provider that is clearly committed to services, support and continuous improvement.

In short, you want a platform and a provider that will support you as you grow – which means investing in a solution you’ll never outgrow.

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