Transforming Investment Operations: Why the Back Office is the New Front Line

At the start of the year, PostTrade 360° published this article, “Arguing for Post-Trade Tech Investment Used to be Hard. No More So,” which highlights the increasing recognition that investing in back-office systems before further front-office transformation is more cost efficient and effective.

As the article notes, and as we’ve consistently argued, while the front office has typically taken center stage, driven by investor demand for sleek digital experiences and immediate access to information, a growing realization is sweeping the industry: True transformation must start in the back office to ensure sustainable impact across the value chain. 

To underscore this point, FundGuard’s Alan Schneider discusses why investment accounting should be the foundation of this transformation and how FundGuard’s cloud-native technology is leading the charge. 

The Front Office Awakening

The front office is beginning to understand that the quality of information they provide to investors hinges on the efficiency and accuracy of the middle and back offices. As noted in the afore-mentioned article, regulatory demands and the need for operational resilience are driving not just better integration of back-office systems to support front-office activities, but re-evaluation of the underlying systems that can’t get the data right in the first place. 

Why Investment Accounting Should be the Cornerstone

FundGuard’s philosophy is rooted in the belief that operational transformation in asset management must start with accounting. As our own John Lehner consistently points out, “you don’t build a house from the roof down; you build it from the foundation up.” Accounting is the foundation because it is the manifestation of all the work that goes into producing a return for the investor. It drives trading decisions, ensures compliance with jurisdictional and regulatory rules, and underpins the resilience of the entire system.

The Limitations of Legacy Systems

Legacy debt is an ever-growing source of angst for investment operations. These outdated technologies often lead to errors, delays, and increased costs. It’s the old technology, most often in the back office, that gives people grief because they’ve had to stay up late at night. It’s because the technology doesn’t always deliver.

FundGuard’s cloud-native tech stack addresses these issues by providing assured resilience, clarity, timeliness, and accuracy of data. Paraphrasing one point in  the article, “the industry’s technology backbone demands urgent upgrades before becoming a business continuity risk, an embarrassing market-facing error, or asset outflows.”

Investment Accounting as a Real-Time Data Source

What sets FundGuard apart is our ability to manufacture accounting as a real time data source. Unlike legacy systems peppered with ad-hoc cloud add-ons or new cloud-native data aggregators, FundGuard’s unique cloud-native, NoSQL technology stack and architecture enable a dynamic accounting engine that constantly brings data in, applies controls and rules, and feeds it out in real-time, fit for purpose across multiple business views. This means that accounting data is never stale and is consistently streamed across all use cases, ready to use with no further effort.

The FundGuard Difference

The benefits of FundGuard’s approach are manifold. For example, timely data access can help mitigate corporate action errors, which are often the largest error cost in middle office operations. Real-time accounting data also enables more dynamic portfolio construction and risk management. Moreover, FundGuard’s technology can facilitate emerging disintermediated models, such as those using distributed ledger technology (DLT).

Cost Savings and Efficiencies

Beyond the enhanced digital experience, FundGuard’s technology offers significant cost savings and efficiencies. By integrating all the necessary tools into a unified framework, FundGuard eliminates the need for multiple systems and manual reconciliation processes. This not only reduces costs but also minimizes risks and exponentially improves scalability.

Incremental vs. Complete Transformation

The question of whether transformation should be incremental or a complete rip-and-replace is a complex one and depends on the scale of the transition and the asset classes involved. However, FundGuard’s technology makes the transition process much shorter and less disruptive than with legacy systems, providing a measurable, quickly realized return on investment for the middle and back office.

Discover Possible

The asset management industry is undergoing a fundamental shift. The front office is realizing the importance of a robust back office, and new era investment accounting technology has emerged to be the cornerstone of this transformation. FundGuard’s cloud-native technology is at the forefront of this transformation, streaming dynamic, real-time investment accounting data, enhanced efficiency, and significant cost savings. As the industry hivemind continues to think beyond the scope of what has been known through the lens of legacy technology, the possibilities are endless. 

Ready to join the transformation? Schedule a demo to learn more.