Investment Accounting Utility Graphic

Is the Future of Investment Accounting a Collaborative Utility?

An FGX blog contributed by Harriet Roden, Citisoft

 

FundGuard and Citisoft have kicked off 2025 with a continuation of our co-hosted London roundtables for executives from across the London asset management community. The sessions are turning out to be quite candid and collaborative conversations about the industry’s path to transformation and areas for potential co-investment – or what Chris Mills of Citisoft has dubbed FOBO: The Future of Back Office. 

 

It was in this spirit of collaboration that new and previous participants returned to the table to discuss the concept of investment accounting as a collaborative industry utility. Following is a recap of the 22nd January roundtable, as captured by Citisoft’s Harriet Roden.

Defining the “Utility” Model

Recent headlines reveal that major players are consolidating assets through strategic expansion and M&A activity, ETF inflows continue to surge, and even traditionally staid corners of finance are exploring the potential of digital assets. 

 

These trends indicate a rapidly evolving market where adaptability and operational agility are critical. So, as posited at the top of the roundtable discussion, how might investment accounting systems—or any investment processes for that matter—adapt to today’s varied demands from the top of the house while ensuring they remain precise, scalable, and responsive? 

 

A core idea is the concept of an industry utility. But what does it truly mean to build a utility for the asset management ecosystem?

 

The discussion began by exploring key questions that should guide the definition of a utility when considering its merits – or lack thereof—in the asset management ecosystem:

 

  1. Does the activity create a competitive advantage?
  2. Does the activity address a common need of many industry participants?
  3. Does the activity have a critical mass or global reach across many industry participants?
  4. Does the activity meet the common need in a mutually agreed-upon way?
  5. Is the need met by a combination of capabilities that can be provided by collaboration?

 

While the group generally agreed that the concept of an investment accounting utility meets the above expectations in principle, it is important to recognize the practical complexity of the functions it would need to encompass. One attendee likened the idea to an energy utility:

“While flipping a switch to turn on a light at home seems seamless, an investment accounting utility is far from ‘plug and play.’”

Indeed, this complexity demands a careful evaluation of both the value of participation and the risks of opting out. 

 

The following diagram was presented as a concept for consideration.

 

 

Ownership, Governance, and Incentives

The conversation shifted to ownership and commercial models for utilities. A truly effective utility should serve as a genuine commodity with “shared” control—designed to meet both the common industry needs without becoming overly tailored to the requirements of individual firms as well as ensuring “collective” control & input. If a utility becomes too bespoke, it risks functioning merely as an outsourced service rather than a scalable, shared solution. Similarly, if a utility narrows to serve the interest of only one or a few parties, it then becomes a typical competitive offering.

 

The group further considered the broader implications of utility adoption. In addition to assessing its advantages, firms must also ask: What is the downside of not adopting the utility? What risks or inefficiencies does non-participation introduce?

 

One participant highlighted the ownership models of utilities like DTCC and Swift, where large firms jointly own these utilities, ensuring broad participation. Another participant suggested that for a utility to truly succeed, it must be used by asset owners, asset managers, fund administrators and other service providers to ensure alignment across the entire investment value chain.

 

The Reality of Utilities and Shared Solutions

While the concept of a utility remains aspirational, characterised by transparency and singularity in its capabilities, questions were raised about how and if competing firms could cooperate to ensure continuity of the “public good” ethos that should underpin any true utility. 

 

Lessons from Past Experience

When building a successful utility model, there is also much to be learned from the failures of past attempts. One participant referenced the failed Global Straight Through Processing Association (GSTPA), an industry initiative aimed at standardising cross-border securities transactions. 

 

“We made a beautiful car, but nobody wanted to buy it,” said Jürgen Marziniak, CEO at the time of its demise. “The technology was never the problem, it was everything else—the politics, the money, the commercial conflicts, and lack of governance.” 

 

This GSTPA example sparked further questions about what happens when a utility is established, but no one wants to participate.

 

Some participants shared their own experience building utilities in former roles, noting that these utilities were later sold to the marketplace. The group agreed that success would come from starting small (e.g. a slim ‘vertical’ of the value chain) and focusing on specific components of a model or function, with the view that various utilities could eventually come together to support a broader model. For example, one proposed approach – specific to an investment accounting utility – would be to deliver solutions supporting cash positions—a common requirement across the industry, which could provide a tangible benchmark for assessing the utility’s practical value.

 

Navigating Trust, Risk and the Evolving Role of Asset Servicers

It was pointed out that firms must figure out how to effectively leverage technology and services without sacrificing the critical elements of client trust and governance. The distinction between “technology and utility” versus “service and outsourcing” is a key point of tension to be sorted out. 

 

A recurring theme in the discussion was the delicate balance of risk liability within relationships between asset managers and their service providers. Participants acknowledged that while asset managers often look to outsource to asset servicers, this delegation doesn’t absolve them of ultimate responsibility. Regulatory scrutiny means that risk cannot simply be transferred—it must be actively managed.

 

This tension ties into the broader preference for “service over technology.” Participants noted that asset managers often prioritise client service and governance over purely technological solutions, reinforcing the appeal of outsourcing. To that end, utility models and technology-driven efficiencies must also focus on the value of human expertise and personalised service. Ultimately, people and service are seen as critical differentiators. It can be argued, however, that a properly designed tech-based utility would free up those smart people to further innovate and spend more time on added-value services.

 

Adding to the point around service, challenges were raised about the readiness of asset servicers to support a utility model. Many servicers operate with legacy technologies deeply embedded into their core systems. One participant wittingly commented about one such servicer: 

 

“Their tech was built by the Egyptians before they built the pyramids.” 

 

While another vividly noted: 

 

“A utility model from servicers cannot simply spring from Zeus’ thigh.” 

 

No doubt removing or overhauling these systems is not a trivial task. Instead, transitioning to such models requires sustained, determined effort, focused investment, and a strategic commitment to deliver.

 

Participants also debated whether servicers could – or should – play a more active role in driving utility models. Servicers have successfully picked apart aspects of the utility model, leveraging common networks to communicate and capture enough data to build new areas of business. While this strategy has proven lucrative for servicers, it stops short of true utility. As noted in the discussion, for a utility model to be viable, it must meet the collective needs of the industry and avoid being proprietary. Everyone across the ecosystem – asset managers, owners, and servicers – must have a vested interest for it to succeed.

 

Revisiting the Promises of Blockchain

The conversation also revisited blockchain as a potential solution for investment accounting challenges. Years ago, blockchain was touted as a potential common utility to reduce friction and improve efficiency. However, slow adoption has raised deeper questions about how best to deliver a utility that every industry player wants. If a utility is to be designed, it must be decided whether one solution can serve the needs of all participants and their vast differences in operating models and priorities. For further consideration: Will attempts to accommodate the needs of every player risk overcomplicating the utility model and undermine the very standardisation and scalability a utility is intended to achieve?

 

Balancing Bespoke Solutions and Standardisation

The tension between bespoke solutions and standardised utilities is certainly a consideration. For example, as one participant raised, some firms have embarked on building a data lake that allows for bespoke customisation within specific teams, and yet there are still disadvantages. The key, they noted, is ensuring a stable data layer. “Tools are a waste of time unless the data layer is stable,” they emphasised. Automation is expected to transform what firms can do in the next five years, provided the foundational data infrastructure is solid.

 

Industry Resilience

One participant observed that historically, asset management has been a “full-fat” business, characterised by a premium approach to service and operations. However, participants observed that the industry is nearing a breaking point, where escalating costs threaten to disrupt the traditional operating model.

 

A common assumption is that the “megabeasts” of the industry – large, established firms – will steady their ships while the boutiques may struggle to keep afloat. 

 

Yet, participants challenged this narrative, noting that while the biggest players are indeed getting bigger, smaller firms are not only not disappearing but they are becoming increasingly more tech-driven and are unburdened by the politics and stagnant decision-making of larger firms. This resilience among boutique firms signals that the industry is unlikely to collapse into a purely cost-driven model.

 

Instead, the enduring value of trust continues to define the space. Clients are willing to pay a premium for reliability and confidence in their investments, meaning cost pressures alone won’t reshape the landscape. The participants concluded that while the industry is evolving, trust remains the cornerstone, creating room for both large and small players to thrive despite the challenges.

 

Yet some participants acknowledged the pressure to “cut every cost” from their businesses against the challenge of proving and demonstrating trust and oversight to their clients, especially when outsourcing services. One participant described their experience considering a stripped-back approach with no onsite managed technology and scrapping certain controls and audits to focus on trust and governance without complex layers of control costs. This approach was agreed upon by others in the room, as it positions the firm as one that offers a simpler, more transparent service model without compromising trust.

 

Participants continued to acknowledge that cost pressures drive firms to focus inward, often hindering collaboration with their peers too.

 

Intellectual Curiosity and the Future of Collaboration

One participant questioned whether the industry lacks intellectual curiosity. They suggested that a significant portion of bespoke solutions and the lack of interoperability arises because certain parts of the value chain have been indulged. 

 

The solution may not lie in the preconceived answers, but in approaching problems from new angles and building solutions that prioritise governance, client service, and simplicity.

 

As the conversation continued, participants reflected on the industry’s complexity, particularly the divergence between technology-driven solutions and the reality of business process integration. Technology may offer a promising future, but without standardisation and the collaboration necessary to implement it, the vision of a comprehensive utility may remain elusive.

 

The Challenge of Regulation in Embracing FinTech Innovation

The discussion further highlighted a critical tension between fintech innovation and regulatory oversight. One participant shared an example of a software service that sought FCA approval, only to be told the FCA would not endorse it. Yet, participants agreed that FCA approval would likely instil trust in clients, underlining a broader issue: Some fintech providers operate without regulation, creating challenges around trust, cost, and redundancy. The lack of a uniform regulatory framework means that the burden of compliance often falls squarely on asset managers and asset owners.

 

This regulatory lag creates risks for the industry. Without standardisation or a baseline level of compliance for fintechs, it was suggested that there’s an increased likelihood of solutions being hastily aligned with problems, exacerbating inefficiencies rather than solving them. Participants noted this could lead to compounding challenges in bootstrapping technologies into operational models, reinforcing the need for both caution and collaboration.

 

Technology is undeniably transforming the industry, but regulators face a daunting race to keep up. One cited initiative was Project Guardian, fostered by the Monetary Authority of Singapore and involving over 40 financial institutions and policymakers, which demonstrates the potential of collaborative innovation, but also highlights the need for proactive engagement rather than reactive oversight. As one attendee emphasized:

 

“Solving these systemic issues requires more than just proposing solutions – it demands active involvement in their implementation.”

 

However, industry collaboration remains a hurdle. Large players often lack the incentive to move the market forward and make the upfront investment that most are unwilling or unable to make. Regulators and industry leaders will need to align their efforts to ensure the costs and challenges don’t continue to land disproportionately on asset managers and owners.

 

Eroding Barriers and the Evolution of Operating Models

It was also noted that traditional barriers in the industry may be eroding, particularly in relation to product structures. Some participants highlighted the ongoing shift away from mutual funds, increasingly viewed by some as no longer fit for purpose, toward the rise of ETFs. While there wasn’t unanimous agreement on this perspective, the group explored the feasibility of maintaining parallel operating models to accommodate these changes. As long as the front office remains distinct, there appears to be limited need for complete synergy between vehicles. This dynamic opens up opportunities for firms to adapt their operations without overhauling their entire infrastructure.

 

Utility Models in the Current Tech Cycle

The group discussed how the industry is at a point in the technology cycle where investment accounting is well-understood and increasingly treated as a commodity – increasing its attraction for exploring utility models. The consensus was that while the concept is promising, the current state of operational and technological fragmentation makes such a transition challenging. Certainly, many businesses have undergone significant restructuring, M&A activity, and the adoption of derivatives and structured products, creating a patchwork of processes and systems that will have to be unwound for the industry to fully embrace a utility model. Fortunately new technology exists to support a more seamless unwinding than previously possible. 

 

Looking Ahead

The evolving role of technology, data, and nuanced collaboration are undoubtedly shaping the future of the asset management industry, even if  “collaboration” can be a “dirty word” when it comes to compelling firms to work together on shared challenges.

 

As the conversation continues, we’ll discuss potential incentives for firms to participate in collaborative models while balancing their individual priorities. The success of a utility depends on finding the balance between standardisation and adaptability, ensuring that firms can work together without sacrificing their competitiveness, and delivering real value to stakeholders.


The next roundtable will take place on 23 April from 4pm to 6pm at the Eight Club. Please contact antony.slee@fundguard.com to request your seat at the table, or register your interest here.

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