Posted on March 20, 2023
Estimated reading time 2 minutes
Managers are always aware of increased competition in the sector from new entrants who are attracted by growth opportunities. These could be spin out firms from larger funds, start-ups with family and friends funding or institutional banking veterans with a taste for something new. With costs to launch declining due to increased digitisation and more third party vendor support available to start-ups, challenger brands are finding it easier to launch and create digital-first propositions, without the legacy system issues faced by many existing funds.
To remain competitive, infrastructure needs to be at the forefront of decision making on available technology budget. Investing in or upgrading a modern technology stack is often the best way to enable businesses to stay relevant, adapt at pace, and face the current squeeze on both cost and resource pressures with confidence.
It is of note that successful organisations in other industries could also be being drawn to the alternative investment market, using their established technological and brand capabilities to offer efficient services and win market share. According to Capgemini’s latest world wealth report, 74% of high-net-worth individuals would be willing to consider wealth management services from firms such as Google, Apple, or Amazon, increasing to 94% of those who are considering switching their primary wealth management provider in the next 12 months.
New rules around transparency create further awareness of the fee structure of financial service providers. Further pressure on margins is coming from rapidly changing regulations across different jurisdictions, which can be challenging and costly for established or emerging funds to embed into their processes. This often results in additional manual workarounds that create barriers to efficiency and growth.
To gain visibility across the full IT stack ― not just into the network but also into the applications, database, cloud, and user and storage infrastructure ― organisations need an end-to-end perspective that vendors are expanding their capabilities across the stack to provide. Ultimately, this could lead to single platforms that address multiple regulatory, investor, data and security solutions and stakeholder needs. In fact, it is arguable that Microsoft is already at this point.
The value of visibility
Perhaps the biggest benefit of working towards an end-to-end single provider tech stack is related to the support, maintenance, reliability of the tools and applications but also overall cost and – vital for a regulated market – security. The Microsoft stack supports a diverse set of applications and tools that are designed to work together, beginning with back-end databases, cloud, Microsoft Office 365, and the Power suite which enables firms to automate deal and trade flow by building solutions to the firms specific requirements.
Pressure from the regulator, investors and allocators mean that institutional grade technology solutions are required to win mandates and generate alpha. Visibility of your tech stack, and the access required for deal, investor and regulatory data is at an all-time high and market commentary suggests these requirements are going to keep escalating. Pressure from third party technology providers will only increase the necessity for the market to keep developing solutions to support investor and allocator requirements.