Sell-side firms are slowly embracing an integrated post-trade operation as sticking to a silo-based approach introduces various challenges and hinders future innovation and growth. Paul Clark, Head of International Post-trade Pre-sales at Broadridge Financial Solutions, explores the top six cost considerations financial firms need to review ahead of investing in a multi-asset system for post-trade processing.
6 Key Cost Considerations When Planning A Multi-Asset System Overhaul
The are six key cost considerations a sell-side firm must take into account when planning to adopt a multi-asset class post-trade operation. These include:
- System testing by operations staff – This is an important cost consideration because spending time testing multiple systems takes time away from the firm and its ability to focus on its core business functions.
- Data mapping and reconciliation for client and regulatory reporting – A multitude of relationships between different solutions can create greater complexity which is not sustainable to manage and maintain. This can result in a longer time to market and often results in one-off, very expensive costs for firms attempting to bring in disparate systems.
- Internal IT staff time and effort to support various tech platforms – Same as above.
- Resources required for upgrades – Maintaining a disparate number of solutions across the post-trade landscape will result in the need to have multiple upgrades per solution. This will mean that firms will have to spend more time and resources to try and stay current rather than implementing for a new change. Not only will firms incur costs for conducting testing for single purpose solutions, costs will also be incurred as firms test the interactivity between its disparate solutions. This will divert resources away from key initiatives and the testing and upgrading process may take up a disproportionate time compared to if a firm just had one multi-asset solution.
- Annual license costs – Reducing silos and using a multi-asset solution can reduce overall expenditure (Internal support and maintenance for running or integrating infrastructure) and external (consolidated relationships, SLAs, etc.).
- Training staff – Training staff to use the new features across multiple platforms A multi-asset platform allows for easier programs of training and therefore more fungibility of resources.
3 Steps For Getting Started
To start adopting a multi-asset change, firms should consider three key areas:
- Understand what the main business drivers and concerns are
- Concentrate on looking at ROE as soon as possible within the lens of new functionality, but with the practicality of bringing speed to market within a controlled environment
- Consider how its business problems can be solved with a multi-asset solution. For example, by implementing a modular future state platform that delivers capabilities across asset classes , a financial organisation is able to decommission discrete functions of each legacy platform into a common and mutualised service such as position management. This approach brings faster delivery of ROE through increased capability, optimised operational efficiencies and harmonized & consolidated data sets across asset classes, business lines and global centres.
Cross Asset Is the Way Forward
Firms will start considering their cross asset capabilities as they seek to understand how to better use data and take advantage of new technologies. Firms typically reassess where they can reduce operational costs beyond head count in their organisation on an annual basis, and there will be a point soon where they can no longer further reduce costs by improving processes within silos but will now need to look at overall operational cost reduction across silos. We expect firms to partner with strong solution providers with shared core values that can help them achieve transformational levels of operational efficiency while reducing overall costs.
*To read more on the topic, please refer to the recently published report “The Case for a Multi-Asset Post-Trade Approach, published by Firebrand Research and sponsored by Broadridge Financial Solutions.