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7 Indicators of a Failing Financial Portfolio Management System

7 Indicators of a Failing Financial Portfolio Management System
"""The prevalence of legacy systems is one of the most serious threats that most Portfolio Managers face.

Over the last three decades, the advancement of technology has empowered investment advisors, from simple spreadsheets to complex home-grown systems. From then to now, the industry has grown at an exponential rate, bringing with it enormous complexity. Round-the-clock trading in markets from New York to Sydney, varying accounting standards, shortened settlement cycles, and, of course, increased regulation and security issues are just a few of the challenges. As if that weren't enough, technology seems to change on a daily basis, leaving many legacy systems struggling to meet customer expectations. Cheaper, faster, smarter, and more efficient standards must be the norm, not the exception. Failing systems can severely limit your company's ability to service customers, maintain market share, and grow the business.

Legacy systems can pose a significant risk to your business in this age of big data, business intelligence, and data analytics. Being behind the curve is not an option if day-to-day operations require the ability to manage, process, distribute, and accurately report financial data. If this sounds familiar, it's time to ask yourself, ""How did we get here?"" and, more importantly, ""How do we get out?""

Here are the seven signs that your system is decaying and how it should ideally function:

1. Are you having trouble managing data because of disparate systems?

Maintaining data in multiple systems or manually transferring data from one system to another will result in inconsistency and errors. Is your data easily identifiable, consistent across multiple systems, complete, accurate, and reconciled? If you answered no to any of these questions, you should reconsider your platform. Your system must be capable of eliminating manual data flow, updating all data with a single change, delivering timely and accurate reporting, including intra-day reporting, and making data easily traceable.

2. Do you have a professional client communications team?

Investors expect your reporting to be clear, concise, and highly tailored to their specific requirements. This is particularly true for institutional investors. Organizations that are able to meet these expectations will have a significant competitive advantage over those that are unable to. If your current system does not provide the level of reporting that your clients expect, you risk falling behind.

Your clients' expectations extend beyond the form and content of reporting to how you deliver information. They expect instant access to real-time information, whether via a web portal or a mobile platform. In order to remain relevant and competitive, your systems must be flexible enough to send and receive communications via any channel of your client's choosing.

3. Struggling to manage complicated global investments?

Dealing with multiple regional and global investment regulations, such as UCITS V and VI, Solvency II, AIFMD, and EMIR, can be overwhelming. All of these regulations demand that you keep reliable, accurate, and transparent data. Workflow Management, Data Management, and accurate reporting are required to comply with these regulations. Data, risk management, and accuracy are critical for meeting regulatory reporting requirements.

With the proliferation of data sources and data complexities, your organization requires solution providers who can assist you in managing your data. Your system must not only be scalable, but it must also provide actionable business intelligence in an understandable format.

4. Having difficulty integrating disparate systems?

True integration entails more than simply connecting systems; your systems must be able to communicate with one another in real time. Manually moving data from one system to another reduces efficiency and increases the risk of error. Integrating disparate systems not only reduces these risks, but it also improves efficiency by ensuring that back office and front office personnel see the same transactions, cash positions, and holdings. This ensures that the entries in your Investment Book of Records are recorded correctly (IBOR).

Many businesses use multiple systems for accounting, reporting, reconciliation, and client information management. Making these systems talk to each other may be difficult if they were provided by different vendors. If you have workarounds or portfolios outside of your legacy system, it is time to reconsider its usability. Your system must support centralized and consistent portfolio management activity. Multiple systems' work is consolidated into a single platform in an end-to-end portfolio management solution built on open architecture. Such a solution will provide easy access to third-party systems or any other system built in-house, allowing you to reduce your technology footprint while increasing efficiency.

5. Rising legal and compliance expenses?

According to a 2013 survey of Chief Technology Officers, one of the most significant operational and technological challenges that asset managers face is complying with current and future regulatory requirements. Because of the complexities of the regulations, outdated reporting systems are more of a liability than an asset. Many budgets are being overwhelmed by the compliance costs of regulations such as AIFMD, UCITS V and VI, and FATCA. Furthermore, aggregating data from various systems for compliance reporting is a risky and resource-intensive process. To reduce both risks and costs, your system must be ready to deliver consolidated reporting by leveraging automation, integration, and standardization of data from multiple sources. Your systems must also eliminate manual data compilation for reporting, increasing efficiency and lowering compliance labor costs while ensuring integrity, consistency, and lowering operating risk.

6. Are you subjected to investor due diligence?

Following the 2008 global economic crisis, institutional investors have become extremely wary of due diligence, resulting in intense scrutiny of operations. The 2008 financial crisis highlighted operational risks - the risk of failure caused not only by market forces but also by a lack of infrastructure and controls. Investors have also become more tech-savvy; they ask the right questions and know what to look for. To stay competitive in this critical market, your system must withstand intense investor scrutiny. You must demonstrate that you have the controls in place to effectively manage risks and that you are already following well-organized processes. Investors will take their money elsewhere if they detect any gaps in your workflow and discover that you rely on manual processes and workarounds.

7. Legacy systems are not being supported, serviced, or enhanced as expected?

A product is only as good as the person who sells it. Is your provider giving you enough attention after the sale, such as 24/7 support? Does your provider have a track record of releasing new products on a regular basis? Is product training available? Are they open to new ideas or suggestions? If you want your new system to last, your provider must provide long-term support. Your product must be scalable, adaptable, and built with open source technologies. Furthermore, your provider must not only assist you in getting started but also ensure that your systems run smoothly and without interruptions. As a relationship is a two-way street, providers must be able to respond to your issues quickly while also assisting your business in adopting new functionality as and when it is required.

Invest in your own development.

Your company's heart is a portfolio management system. Your business may be jeopardized if you have a faulty system, and you may not have the time to address it before it completely fails. Investing in technology will increase your efficiency, reduce your risks, and allow you to make more informed decisions. As a result, your provider must have a track record of being committed to long-term services, continuous improvement, and supporting you as you grow."""

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"7 Indicators of a Failing Financial Portfolio Management System" was written by Mark under the Finance category. It has been read 112 times and generated 0 comments. The article was created on and updated on 13 January 2023.
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