Investment firms must adapt to today’s data-centric technology or get left behind

The investment industry has been operating within the confines of tradition and strict regulations for quite some time. However, continued reliance on outdated legacy software systems can disrupt an organisation’s innovation and growth. Yet, investment companies all over the world keep these systems in place due to the perceived cost and complexity of replacing them with the latest technology.

As technology continues to advance and the world becomes more digitally dependent, there is increasing pressure on firms of all sizes to ensure their buy-side operating model is as efficient as possible.  While investment firms have typically prioritised the front-end of their product, the back-office is equally important as the engine that drives any organisation. In today’s rapidly evolving markets, significant rewards await businesses who can successfully deliver innovation and efficiency within their organisation.

The hidden costs of manual processes

Investment firms operating in siloes typically end up using multiple platforms with similar capabilities, leaving the firm with a growing portfolio of expensive and disparate systems. The inefficiency of firms’ end-to-end workflows, the excessive cost of numerous platforms and maintaining several third-party vendor relationships can be costly and most worryingly impacts their ability to adapt to new market challenges and demands.

For many, lack of suitable IT systems is the most common operational challenge UK investment businesses face. Many face challenges around reliance on manual processes, an absence of suitable solutions available in the market or lack of resources available to invest in such solutions. In the dynamic realm of data management, the choice of tools and solutions is crucial for steering business decision-making and operational efficiency. Investors need faster, more personalised customer experiences, and investment firms need to focus on providing seamless experiences, even in the face of economic turbulence and increasing regulatory requirements.

One area where organisations can greatly benefit from advanced technology is dependency on spreadsheets. Currently, many buy-side investment managers are still reconciling data in spreadsheets or using generic platforms that lack key features. In fact, more than nine in 10 agree that their firm relies too heavily on manual tasks and spreadsheets, meaning that the UK investment management industry still has some distance to go to remove reliance on manual reconciliations.

But the expansion of the digital economy, rising transactional volumes, and ever-changing regulatory obligations mean that relying on old-fashioned approaches to conduct crucial processes is a false economy. Excel is severely limited in terms of auditability and lacks key controls, making it near impossible to see who has changed what and when. Spreadsheets also end up costing firms more in the long run, as organisations will have to throw more resources – and therefore spend – to plug gaps and fix problems. As businesses grow and data demands evolve, transitioning to more sophisticated solutions becomes imperative to ensure data accuracy, integrity, and scalability.

Is automation a game-changer for the investment industry?

As operations become more complex, automation plays a critical role in the proliferation of data in today’s digital age. The combination of automation and data-driven insights can inform investment decisions, identify market trends, and optimise portfolio performance. Automating processes such as validations and cash transfers can empower investment managers by ensuring speed and accuracy over data-related tasks, allowing them to focus on a broader range of activities where human expertise and creative thinking can bring more value.

According to a recent report by AutoRek, UK-based investment managers claim they are continuing to invest in automation, with 100% of respondents either maintaining or increasing their automation expenditure in the years ahead. Continued investment in automation is promising given firms remain too reliant on manual processes, particularly when it comes to the reconciliations process. Yet, it’s important to note that successful implementation is not always about embracing every available automation tool as quickly as possible. Companies need to ensure that they are strategically selecting applications and finetuning processes that align with their corporate goals and specific needs.

Act now before it’s too late

While emerging technologies hold considerable promise for unlocking new insights and improving productivity, making effective use of those tools requires modern infrastructure capable of capturing and validating large volumes of data in a scalable manner. Complex data and disjointed technology are making firms more cluttered, and this problem will only get worse unless they invest strategically and intelligently in data-centric technology. Replacing manual processes with end-to-end automation can drive significant benefits for investment firms as it presents an opportunity to eliminate much of the friction around reconciliations, reduce operating costs and liberate staff from repetitive manual data work.

The integration of data-centric technology is crucial for investment firms that strive to remain competitive and innovative. To keep up with the demands of fast-moving markets, firms must clear their data clutter and evolve quickly – or prepare for failure.