WATCH THIS WEBCAST TO LEARN ABOUT:

• 02:46 – What options wealth managers have in order to achieve true technological nirvana or as close to that goal?
• 05:01 – What is big bang approach for wealth management firms?
• 05:28 – What is modular system implementation approach?
• 06:53 -Three Key business benefits of Big Bang and Modular approaches
• 09:41 – Three Shortfalls of Big Bang and Modular Implementation
• 13:04 – What is Modular Lite Methodology? How’s it different than Modular? What are the key benefits?
• 15:57 – What Should Wealth Management firms be doing? How should they be assessing both the approaches?
• 16:35 – The four key takeaways
• 20:25 – Q&A

WATCH THE WEBCAST OR IF YOU PREFER YOU CAN READ THE TRANSCRIPT BELOW:

Host – Stephen Pinner, Goodacre UK: Okay. I think we’re about ready to go. So, good morning everyone and welcome to the Systems in The City FinTech Online Conference 2020. And I hope that you’re going to find today’s session really informative and useful. We have a terrific line up of speakers for you. My name is Stephen Pinner.

Moderator – Jon Cosson, JM Finn: I’m going to move straight on to the next speaker, and that’s William Rose, Associate Director UK and Europe, Business Development of Contemi Solutions. William is solely responsible for new business development in both the UK and European territories. In addition to his role at Contemi, William sits on the board of the Securities Investment Management Association – SIMA, where he meets the members monthly, discussing an array of industry topics, trends and challenges.

One of the questions William has posed to the group is the key points that he would like to get across is, ‘the importance around looking internally before you look externally, there is no gold standard or one size fits all’. So on with that, I’d like to pass over to William who is going to talk about ‘Modular Approach or Big Bang’

Presenter – William Rouse, Contemi: So, good morning All! Firstly, thank you very much Goodacre for having me. Thank you all in advance for your attention, your patience as well as your very kind questions at the end of this presentation. And so a bit about me first, like John mentioned, I’m director at Contemi for both the UK and European operation. Part of my role is to continuously enhance, improve our offering to the wider wealth management market. And I also sit on the board of SIMA, the securities industry management association, which is run by Goodacre. And I’m mindful that some of you are members of that too.

So I’ve been given the opportunity to discuss the benefits, intricacies and shortfalls of both Modular and Big Bang technology infrastructures. I’d also like to include, another level to this, and that’s Modular Lite which I’ll touch on later.

And now I was in a meeting sometime ago and the gentleman in question could even be listening to this now, so if you are, and thank you very much, you’ve given me a very good anecdote to get started with. We’d just finished an exceptional presentation if I may say so myself, we were discussing our open API ecosystem, the benefits about, system agnostic approach to interoperability so on and so forth, It was riveting stuff. Towards the end of meeting, we got onto the subject of markets interoperability amongst technology and system providers. Again, you really had to be there. The comment he made stuck with me, he said, “why can’t you not just get together and make something that works for all of us?” And in fairness, he actually got quite a good point but the mistake he made was overlooking the fact that you’re all completely different from one another in just about every way possible, so much so that there really isn’t a market standard anymore. So what system selection boils down to is your immediate and longterm requirements and goals, as well as identifying where your specific strengths or weaknesses lie.

Now we as a service provider and certainly my market peers have all been guilty of it in the past and that’s telling you exactly what you need and why you need it. The truth is, no one knows your operation better than you. No one knows what you need more so than you and it’s becoming more and more apparent that there really is no such thing as a one size fits all or a proverbial gold standard seemingly obvious statement I know, but you’d be surprised at exactly how many people forget that fact.

Now, the beauty and the beast of the modern day wealth management market is that you have a vast array of options available to you sometimes almost too many. For now, we have two different system strategies to discuss fortunately, and that’s ‘big bang vs modular’. So, I’ll also touch on modular lite.

WHAT IS BIG BANG APPROACH FOR WEALTH MANAGEMENT FIRMS?

Now, big bang can certainly be interpreted in a host of different ways. So for clarity and consistency, I’ll be describing big bang as a singular vendor relationship. Whereby, what a wealth management firm does is utilizes the full technology stack across the front, middle and back office functions with just one provider, the more traditional approach.

WHAT IS MODULAR SYSTEM IMPLEMENTATION APPROACH?

Modular in this respect simply means best of breed so, what you’re doing is utilizing a variety of service providers to meet specific needs across one, or perhaps a few specific functions. An example of this would be using a certain technology provider for client engagement purposes and then utilizing another organization for a model investment management functionality. So to paint the picture as to what I mean by modular light and to use an analogy my mum’s always spoke to me in pictures that seems to work for me.

Let’s say I was going to buy an old house that needed absolutely everything doing to it in order to make it my dream home and I wanted to get it all done in one hit. Realistically I wouldn’t be able to live in it for say six to nine months, perhaps even a year, I’d go down the big bang route. If I want to be upstairs doing first and then the downstairs and I’m with potentially the garden, I could move in straight away, I’d move around to accommodate the works, but I wouldn’t be enjoying the house as a whole, this will be modular.

Now, if I was unsure as to what I wanted to do to the house as a whole, I’d move in, get a feel for what works and what doesn’t, what fits my taste and certainly what improvements I needed to make. I’d enhance and make changes room by room as in how my budget resource and of course my patience allows. So I’d allow for quality of transformation as opposed to sticking to a timeline, I’d adopt the modular lite method.

LET’S TALK THROUGH SOME OF THE CURRENT BENEFITS.

Now we’ve established already that every business is different. There’s intricate quirks and exotic behaviors and cultures so, not all benefits will be the same for everyone. I’ve generalized the most universal strengths realized by the vast majority of firms when choosing either route. So with both disciplines, the benefits are obviously abundant and plentiful, but I want to whittle these down to three main virtues, again I’m very mindful of the timeline I’ve got.

BIG BANG BENEFITS

Simplified Governance: So the first one starting with big bang, simplified governance, a bit of an obvious one. You’re contracting with one partner, there’s one relationship to maintain and have oversight of. If something breaks, there’s no finger pointing from one organization to another. This also allows your selected partner to thoroughly understand your business from front to back, which in theory should yield a better service and solution offering for you, if managed correctly of course.

Standardized selling technology across the board, again, pretty obvious one. So there’s no interconnectivity issues, one technology stack removes the potential issue around multiple systems not being able to talk to each other, users realize a seemingly seamless flow from front to back.

Strong and Stable – Like I mentioned earlier, this is more traditional method. So big bang- one provider is perceived as the more stable route to go down, a one stop shop, one port of call, one contractual partner, and more importantly, one clear sets of service levels. Such approach is a lot easier to maintain and support going forward.

MODULAR BENEFITS

Control Retention: And I suppose, the obvious starting point with the modular route is you’re ultimately in control of shaping the systemic aspects of your target operating model. For the record, I’m going to say target operating model god knows how many times throughout this presentation so be mindful of that. And you’re selecting the pieces that need to be prioritized, and you’re building on your terms. So you’re not dictated by your provider’s roadmap, you’re not having to conform to their priorities or their other client’s priorities, you effectively set your own.

Best of Breed: Adopters of the modular approach also able to utilize market leading providers in their given field so, what you’re doing then is creating a truly best of breed model. You’re also able to select the pieces of technology that best support your immediate requirements or longterm goals.

Increased System Agility: When I say increased system agility, what I mean by that is that it’s much easier for you to lift pieces of functionality out and implement new ones without hindering the overall operation. And there aren’t as many constraints around what you can lift and shift with a modular approach when compared to big bang, they are very high level benefits.

NOW SORT OF FOCUSING ON MORE THE WEAKNESSES ATTACHED TO THE BOTH.

Big Bang,

Speed of Change: Generally speaking, the most common weakness that comes with being wedded to one provider is speed of change. The constraints tend to come from formalizing upgrades and change requests across the entire client base. So in many cases your priorities aren’t always going to align with that of your peers. Again, money talks at the end of the day.

Concentration Risk: Concentration risk is a big one, adopting this method would leave you exposed to a single provider. And especially when you’re relying on them for key systemic and operational functions, and they may start deteriorating in a certain area of their offering. In order to move to another provider, it could become quite arduous and costly in order to unpick the stitching in order to rectify those shortcomings.

Priority Variance: What I mean when I’m talking about priority variance is the alignment of priorities across the providers client base as a whole and I did touch on that earlier. An example of this may be that the corporate actions function may not work as well for you as it does for other firms. Therefore nothing’s really going to be done less required by the client base as a whole, or indeed you’re willing to shell out some money for it for some bespoke development, which again, we system providers do like doing that.

So Modular side,

Collaboration: The issue here is, you’re effectively reliant on your various providers to be able to connect and talk to each other, to fully utilize and enjoy a seamless operation. So one thing that tends to pop up and again mentioned it earlier is, finger pointing when things don’t quite go to plan. So it’s further component is a matter of communication when one provider has a critical upgrade that could impact a multitude of different functions.

Multiple Relationships: I suppose one of the more tedious shortcomings with this approach is, the need to manage relationships with multiple service providers. That comes both internally and externally and it can sometimes set from resource and divert attention away from the more business, crucial functions within your operation.

Lack of Standardisation: There is an inherent lack of standardization, that’s an obvious flow. Using client engagement, again, as an example, let’s say an individual open their account with you, by a certain channel. Yet they’re using a different channel to view their portfolio or even execute trades, it certainly can make the entire client experience a little disjointed. The same applies to a multitude of functions across the board.

Modular Lite: On modular lite, certainly something that’s we’re seeing a lot of demand for at the moment. And, you know, we’ve discussed two pretty common approaches, two approaches that certainly used by the most majority of people listening to this now. But one thing we haven’t touched on yet, and you could argue as well, certainly given our present day predicament and that’s the modular lite model. So in its simplest form modular lite, this is all about utilizing absolute core technology and functionality and then building enhancing and improving on your own terms.

So the key benefits for the modular lite methodology are a dramatically reduced implementation period, a bespoke workable roadmap, aggressive and graduate development, all whilst in a cost effective manner.

Getting back to one recurring theme and again, I keep mentioning it is that you’re all completely unique. You’re completely different from, from one another. And just about every firm’s operation is unique in its own different way. So your requirements are always going to differ from one to the next.

This approach allows you to pinpoint exactly what you need there, and then you’re breaking down the specifics within a particular module and harnessing that the segments that best suit your current and long term needs.

The agility attached to this model is that it allows for quick fixes. And what I mean by that is the patchwork approach. So what you’re doing is, you’re fixing the immediate problems then building to enhance further within your own comfort areas, of course. And another more important factor is that you’re not led by what a product can do, you’re led by what you need it to do. What you’re able to do is, boil down exactly what you need from your provider, and you effectively have a blank canvas.

So we’re on the modular approach isn’t going to get everything over and done within a short space of time. It could take longer for you to reach your target operating model, but you ultimately have the control to dictate every step of the way whereby you’re building and evolving on your own terms.

And one thing this approach also does is it challenges the argument of getting the pain over and done within fell swoop. Now this is through a quick and easy light touch implementation that progresses and becomes functionally richer as and when you choose to evolve.

To use another analogy and again, talking in pictures again, that tends to work for me. It’s like I’m buying an iPhone for the first time. So the vast majority of the technology or the standard set of apps that it comes with that very rarely used right away. To begin with, we’ll use a device for phone calls, text messages, perhaps even storing up contacts after a while we might start using the high resolution camera whilst on one of our daily walks. As we start to learn more about its capabilities, we’ll add numerous email accounts to it, we’ll then realize our friends and colleagues are in WhatsApp groups so we’ll download that app. Before we know it, this thing’s running our lives and that’s been through a gradual learning process where our knowledge and capabilities have evolved alongside it.

SO TO CLOSE OUT FINALLY, WHAT SHOULD YOU BE DOING NOW? YOU KNOW, WHAT APPROACH SHOULD YOU ADOPT?

The inner fence sitter in me says, you know, do whatever fits your organization best, I actually hate doing that, it’s a huge copout I know, but to coin a chap called Simon Sinek and his methodology, is what he believes is what you should be doing is starting with why? Now, why are you reviewing your current setup in the first place? Is it because you need to demonstrate to your board that you conducting regular reviews, basically a box ticking exercise, or is it because you’ve identified something that you believe isn’t fit for purpose anymore.

Again, starting with the four takeaways:

Know your business: again very obvious statement, but something that a lot of people overlook, assess your short term needs, as well as your, your longterm goals. Why are you looking at providers? Is there an issue in one particular area of your operation and perhaps the modular route would suit you best? Are you looking at a complete overhaul? You know, do you want to streamline all functions into one place then perhaps the big bang route would suit best? You know, again, I haven’t touched on the commercial aspect of this because I don’t think it’s too important, but how big are you as an entity in order to assess commercial viability when entering discussions with certain larger organizations, and what’s your risk appetite like for answering discussions with new or less commercially sound entities? What are your company fundamentals? I suppose that’s a very high level question, but what are the main drivers for this project? Is it exceptional service, cost saving, operational efficiency? What does a sensible budget look like? And how long are you willing to commit resources to this project? Cause you would have worked on this stuff before, but nine times out 10 projects do tend to overrun even so slightly. More importantly, what can you do yourself? Yeah, it’s definitely worth looking internally before you look externally.

Next one, target operating model: I have mentioned this how many times now but a very commonly used phrase in the industry and rightly so, but if you have a clear idea of what the bigger picture looks like, then your selection criteria instantly becomes clearer. You know, before you start reviewing where to invest, where to prioritize and certainly where you need to immerse the majority of your focus, you need to fully understand your operation, where it is now and where you want it to be. I alluded to earlier, no one knows your business better than you. So start off by having a clear idea of what perfect looks like, where inefficiencies lie and what it would mean for the wider organization, from an operational and I suppose a cultural perspective to achieve this idea. And there’s no gold standard. One common slate set time and time again is that firms will tend to follow their peers. And what they’re forgetting is that what could work perfectly for them could work absolutely terribly for you. There’s no one size fits all in this space, understanding your business as a whole, then understanding where you want to take it and it should always be at the forefront of your decision making.

And harness knowledge: what do I mean by that? And this is engaging at all levels. So use the boots on the ground. These are the guys that work with your systems and certainly your technology on a daily basis. So how could their job be made easier? How could that function be more efficient? And sometimes we forget the real industry experts are certainly right under our very noses certainly what I tell my boss.

Anyway future focus: so the final takeaway, view your provider as a partner for the next 10 years. And what does that look like? You know, does their roadmap align with your goals and aspirations? You know, are there any conflicts, are there any potential conflicts? What does the support structure look like? Are you buying a brand, and this is important are you buying a brand or are you buying an ally that will help you achieve that Nirvana that we spoke of earlier. And ultimately ask yourself why they would be a good fit for you?

QUESTIONS

So, John, I didn’t want to kind of harp on too much. I’m gone to the question section. I don’t know if anything’s come in at all. It’s not exactly the sexiest subject to talk about.

Jon: No, we’ve got a couple of things, William. We’ve got a few minutes. So I’ve got a couple of questions here.

Audience Question 1: “A modular approach requires staff to have more than one system open at the same time as well as systems experience. How can you address this?”

William: “Talking from a Contemi perspective we advocate a single front end browser access point that points to the correct system/task that is driven by your persona and/or profile. Our clients utilise “WIN Home” which acts as a conduit between modules and can cater for single sign on by linking with your active directory.”

Audience Question 2: “Hi William, you as a firm obviously advocate a modular approach and forgive me if you’ve already answered this, but going back to the beginning of your presentation what examples do you have of working closely with your competition?”

William: We very much operate an open API eco system so aim to be as interoperable as possible when meeting our client’s needs and fitting our modules into the overall ‘bigger picture’. One recent example is at the beginning of the year we partnered with a stock lending platform to fully automate the corporate actions function within their operation. This particular firm is very much driven by their own technological capabilities.

Audience Question 3: “Hi William, Whilst I’m advocate of a modular approach myself I often experience two key issues:

1. Often the big picture is missed out leading to key innovation ideas which have a larger time to market not being tabled for discussion.
2. This approach often leads to messy information system landscape which can run a high cost. What are your views on managing that trade off?”

William: One of the biggest challenges with the modular approach is getting all providers to sing from the same proverbial hymn sheet! Add to that the challenge of getting multiple providers to speak to each other. One of the ways that our clients, and in turn, we manage this is through thorough transparency throughout the entire relationship, our model is very much geared towards growing our eco system alongside our clients so building those links as the relationship evolves. The better we understand our clients, the better our offering.

Jon: Thank you. I think your presentation, it was very interesting. We’ve got no more questions for you and it’s pretty much spot on time, so thank you very much. Thanks.

If you have any questions regarding this presentation or if you’d like to know more about any Contemi products, please write us at info@contemi.com

If you have any questions, email us at info@contemi.com