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The pace of change in the asset management space is accelerating at lightning speed, driving asset managers, asset servicers and related providers to double down on operational optimization. But what exactly does the business need and how can firms best position themselves to survive and thrive in this competitive future?
FundGuard, in collaboration with Citisoft, recently gathered a group of strategic Ops and Tech executives from some of Europe’s leading asset managers and service providers to share perspectives on aligning business and operational plans as well as debate the most useful measures of success and best ways to scope and phase any proposed new solution. The participants discussed the struggle to balance legacy systems and new initiatives, along with the importance of strategic partnerships and the role of strong sponsorship in ensuring project success.
Following is a summary of the discussion and debate. Out of respect for Chatham House Rules, participants’ names and organizations have not been cited.
One of the first challenges raised was the difficulty firms face in building a compelling business case for change. Many projects experience delays because companies struggle to accurately assess the scope of the problem and the benefits of solving it. This issue is especially prevalent when dealing with complex, multi-faceted initiatives that involve various stakeholders and legacy systems.
Citisoft’s forthcoming Transformation Survey, which surveyed 28 UK-based asset managers and owners, found that 38% of projects identified as necessary to support business goals are delayed due to firms being unable to appropriately size the problem and define a compelling business case. It was noted that a project does not truly begin until a budget is allocated, but recognizing the need for change is difficult when legacy systems and complexities obscure the path forward.
Budget constraints are also a major roadblock to innovation. Firms often find that a significant portion of their budget is devoted to maintaining legacy systems, leaving little for new initiatives. In fact, as one participant stated, half of budgets are typically allocated to maintaining these systems. This creates a tension between continuing with business as usual and driving change, which led to the analogy of firms being either “sheep” (following the status quo) or “shepherds” (leading the way in transformation).
Regulatory requirements further complicate this balance. As regulations become more demanding, they consume even more of the budget, further limiting the resources available for forward-looking projects. The trend of shifting capital expenditures (CAPEX) to operational expenditures (OPEX) was also discussed, with participants noting that it has led to smaller, tactical changes rather than the large-scale transformations firms may desire. This trend alters the business case justification, making it harder to demonstrate long-term value for major investments.
Participants agreed that strategic partnerships can play a pivotal role in helping firms navigate these challenges. Such partnerships help firms understand what’s possible and provide a framework for balancing the maintenance of legacy systems with the pursuit of new initiatives. There was a consensus that managing business cases and system transformation requires collaboration, as doing it alone is often unsustainable.
The group explored whether firms should keep projects “off-book” to avoid disrupting current operations or create dual pathways that accommodate both legacy systems and new initiatives. Both approaches have their complexities, but the group recognized that without partnerships, firms face significant difficulties in achieving long-term transformation.
A live poll during the roundtable revealed that regulatory and geographical challenges remain a significant concern, particularly in back-office operations. Participants discussed the T+1 settlement changes, which are a priority, but noted that global operations remain out of sync. Markets like the US and India differ in timing and liquidity, and while the system works, improvements are needed, especially around automation.
The conversation also touched on the transition from manual to automated processes, which is critical for reducing high-risk manual edge cases. However, reluctance to adopt Distributed Ledger Technology (DLT) remains prevalent, with some firms citing a lack of demand as a reason for slow progress in DLT proofs of concept. It was cited that regions like Singapore are further along in DLT development, working across the value chain to educate regulators and implement future-proof solutions.
Participants emphasized the importance of having a strong internal sponsor for any successful transformation initiative. Without a committed sponsor who continuously advocates for the project, securing a budget and maintaining momentum can be difficult. Long-term projects often suffer when a sponsor retires, is promoted, or moves on, leaving projects vulnerable to deprioritization.
A sponsor’s role goes beyond securing initial funding. They are critical for managing stakeholders and ensuring that the project reaches completion. It was noted that a strong sponsor is particularly important for technology-led programs, which can face significant competition from regulatory-driven initiatives when it comes to resources and budget approval.
The importance of Proof of Concept (PoC) was a recurring theme. PoCs help firms validate solutions with real data, making the benefits more tangible and helping to solidify the business case. Participants stressed that PoCs are critical in getting stakeholders on board and demonstrating a solution’s effectiveness. However, there was debate about whether “PoC” is the right term—some participants suggested calling it “Proof of Value (PoV)” to emphasize a longer engagement and deeper investment from both vendor and client.
One of the key challenges highlighted was that PoCs often carry significant risks for vendors, who invest heavily with no guarantee of future business. It was suggested that involving both tech teams and business stakeholders early in the process can prevent issues and ensure the solution addresses the real problem. The business case must clearly answer critical questions: Why are we doing this? What problem does it solve? What is the ROI?
Several pain points were identified during the discussion, particularly around engaging the business in transformation efforts. A specific and significant challenge raised is the growing demand for customized reports, which puts an increasing burden on teams. Reporting requirements are becoming more complex, with clients expecting more while providing fewer resources to meet those demands.
Participants discussed how data management could help alleviate some of the burden by enabling firms to do more with less. One participant suggested that clients should bear the cost of customization, while another argued that solving these issues holistically—rather than piecemeal—would be more effective in the long run.
Vendor relationships were also a focal point. Participants shared frustrations with some vendors who charge extra for core functionalities that newer clients receive at no additional cost. Ensuring that vendors and clients are on the same page regarding service-level agreements (SLAs) is crucial to avoiding these kinds of conflicts.
There’s a growing trend toward standardized solutions rather than bespoke ones, which helps firms ensure resilience and scalability. However, this shift requires thorough planning, particularly when adopting cloud-based solutions. Firms must consider worst-case scenarios, such as vendor failure, and ensure that their technology stacks are robust enough to meet regulatory demands, including requirements like the Digital Operational Resilience Act (DORA).
The path to transformation requires a careful balance of bold leadership, strategic partnerships, and forward-thinking resilience. But more practically, champions of change must be able to build strong business cases supported by data-driven PoVs. We are grateful to our London participants and thank them for their candor and valuable contributions during September’s roundtable. Their insights and collaboration were crucial in shaping the productive discussions, and we especially appreciate their collective commitment to continuing the conversation around what Citisoft’s Chris Mills has officially dubbed: FOBO – The Future of Back Office.
We are now mapping out next steps for a collaborative Proof-of-Value workshop with some “early adopters” and, in parallel, will regroup in January to continue the roundtable conversations. We are excited about the opportunities ahead and look forward to working together on these next steps.
If you would like to join the London consortium, please contact Antony Slee at antony.slee@fundguard.com or Chris Mills at chris.mills@citisoft.com.
FGX: Driving the Industry Forward Together
The conversation that took place behind closed doors at the Barbican in London, could have easily been in a private NYC dining room or a Singapore boardroom. The shared challenges and strategic solutions being employed are applicable on both sides of the Atlantic and across the global asset management space as firms navigate a complex and ever-changing landscape.
To that end, we have formed the FundGuard Exchange (FGX) – a consortium of bold, tech-forward change agents collaborating to transform the industry by collectively solving commoditized challenges. Currently taking shape as a series of roundtables, working groups and crowd-sourced thought leadership content, FGX is continuing to evolve in collaboration with our innovative partners and we look forward to ongoing dialogue across the industry.
Please register your interest here if you’d like to contribute to the FGX blog series, and/or receive information about our upcoming roundtables in London, Copenhagen, Boston, NYC and Chicago.
About Citisoft
Citisoft is a global consulting firm dedicated to enabling change in the investment management industry. Our consultants are industry experts who have delivered transformative initiatives for global asset managers, asset owners, insurers, and asset servicers. We bring unparalleled experience, offering unmatched domain expertise and leading-edge insights into the technologies and trends that shape our clients’ businesses. Through both strategic and tactical services, we partner with clients to drive technology, operations, and data initiatives from conception to deployment.
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