Dispatch from ICI Innovate: We’ve Got Work to Do

By Erika Alter, Marketing Director, FundGuard

Last week Team FundGuard traveled to San Diego for the ICI Innovate Conference, which brought together operations, tech and service providers from across the U.S. asset management space to discuss the latest trends shaping the future of the funds industry. 

With presentations and panel discussions about cybersecurity and AI to T+1 settlement and distributed ledger technology, it was clear that the industry is ready to embrace innovation. What remains to be discussed, however, is how the industry is going to successfully adapt decades-old systems and processes to integrate the latest bleeding-edge AI capabilities or, say, adopt proper oversight of current and future cybersecurity threats. 

The possibilities are certainly there, but they can’t be fully realized without first transforming core operations and the underlying technology required to support these latest initiatives. 

To wit, the following themes caught our team’s attention during the week’s discussions and have had us all abuzz about the realities to be considered as industry practitioners and providers plot their paths to transformation.

Cybersecurity: Across the course of the conference, we heard from cybersecurity experts representing the Federal Bureau of Investigations (FBI), the CISA Department of Homeland Security and ICI’s own Senior Director of Technology and Cybersecurity.

Cybersecurity is clearly top of mind for all organizations and one of the greatest threats to business today. Ransomware, denial of service attacks and data exfiltration can have irreparable financial, operational and reputational impact. Given the trillions in assets owned by hundreds of millions of shareholders in the US alone, asset managers and their service providers – as stewards of these assets – must all think differently to  keep investors, their data and their assets secure.

As we’ve previously commented, cybercrime and the cybersecurity needed to mitigate the potential crimes are  driven by technology advances and digitalization, including the move to the cloud. Thanks to this shift in how organizations operate, traditional business continuity processes and approaches no longer apply.

So how can the industry use modern thinking and technology to get ahead of, and stay ahead of, technology-savvy and increasingly audacious cybercriminals? 

1. Continue to bolster policies, procedures and disclosure.
2. Focus on ensuring the investment industry’s resilience is built into your new systems, being mindful that  decades-old systems that pre-date the cloud revolution, are unlikely to ever adequately protect investors and maintain orderly markets because they cannot easily or cost-effectively be updated to meet today’s requirements. 
3. Embrace cloud-native SaaS-based applications that have proven to be more secure than legacy technology on the cloud. Many are designed, developed and deployed with cybersecurity and disaster recovery in mind, and they are quickly, easily and automatically patched and updated to stay ahead of threats.
4. Invest in Due Diligence: Everything from cybersecurity R&D to the people employed and methods deployed must be a top consideration for budget allocation. 
5. Consider Public Cloud Providers: At an infrastructure level, trying to replicate the spend, effort and expertise that the public cloud operators dedicate to keeping their services secure would be a herculean task if attempted in-house. Instead, seek partnerships with Microsoft, Amazon and Google who are known across industries for their efforts to keep customers safe on the cloud – it’s part of their core business. 

AI: Speaking of Microsoft, we were all treated to an informative presentation and eye-opening demo of Microsoft Co-Pilot’s features. The potential for Co-Pilot and other AI applications are crystal clear and can be transformative when it comes to automating the complex, data-driven asset management space. 

And to be sure, within the asset management space, there has been some success in basic approaches to date, such as application of AI in the middle and back office, primarily to ensure trustworthy data for front office digitization. But broadly this has been mostly done by retrofitting AI, or automation and robotics, on top of legacy platforms. 

We believe that true expansion of AI will continue to be inhibited by legacy AI-overlay applications using individual instances of software. The siloed legacy systems currently in place across so many firms can’t capture the true power of AI due to a lack of scale. Firms can’t leverage the value of true crowdsourcing across front, middle and back office workflows without fully cloud native systems that are one code-base and multi-tenant. 

T+1 and DLT

In our year-end Surprises and Predictions blog, FundGuard President, John Lehner predicted a more concerted effort and more cross-collaboration within the industry to productionize distributed ledger technology. He commented that the ongoing rise of digital assets and the tokenization of traditional assets will further incentivize the industry to adopt DLT. Indeed, the buzz at ICI around DLT points to more initiatives and partnerships aimed at leveraging DLT’s transformative potential.

Take T+1, another topic top of mind during the week’s conversations. There is potential for DLT to provide a more efficient, transparent, and secure framework for achieving T+1 settlement requirements, which could revolutionize how financial transactions are processed and settled.

As we’ve noted in our previous T+1 blog, the current and emerging regulations around T+1 settlements are a reflection of the continuous progress in technology. As emerging technologies increasingly facilitate the integration of front, middle, and back-office operations, regulators are becoming more reluctant to accept outdated technologies as a justification for not embracing new systems.

Consequently, regulators are setting higher standards for organizations, expecting them to swiftly adopt and deploy solutions that align with these modern requirements – yet another consideration for firms reluctant to move away from outdated technological systems.

What Now? The Path from Traditional to Transformational Technology

The asset management space cannot create the transformational change required to move the industry forward while still burdened by decades-old legacy technology. Central to the operating model of the future is cloud technology, which brings incredible new opportunities to the asset management industry and can be the driving force of positive change. It should come as no surprise to anyone that this is FundGuard’s point of view.

The consensus across the industry, though, is now also broadly aligned with this perspective. The good news is that innovative and enterprise-proven cloud technology and Big Data capabilities are now available to transform all aspects of how the industry operates. What’s needed now is cross-industry collaboration to create clear paths and next steps toward achieving that transformation. 

Are You Ready to Join the Transformation? 

True and enduring change begins with technology that supports bottom-up transformation. Working in collaboration with our clients and partners, FundGuard is revolutionizing investment operations by modernizing investment accounting. Our aim is to eliminate the burden and risk of back-office tasks, freeing up our clients’ time and resources for real differentiation.

Reach out today to discover the possibilities of fully cloud-native, ai-powered, big-data, multi-tenant software and become part of our expanding ecosystem of industry innovators.