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  • IFS

2019: Boosting the Back-Office and Igniting Innovation

As we enter 2019, we are faced with continuous fears and uncertainty around a looming recession. So it should come as no surprise that, in our view, the year ahead will be focused on two key concepts that stand the test of time: maximizing margins and increasing value.

In many ways, these goals end up producing similar initiatives across firms. We tend to see a "circle of life," where projects that are geared to reduce costs and increase efficiency will, by extension, also provide added value to the firm as well as their clients. Many technology projects are focused on reducing costs in some way, shape, or form; which will naturally free up valuable resources to do more value-added work or provide value-added automation and/or services. Acquisition and consolidation projects are common during these times. And these types of efforts, of course, drive an increase in revenue to help maximize margins. But, they also come with initiatives designed to trim costs, increase automation, and provide additional services to advisors and investors.

Continuing that theme, at IFS, we believe these three factors will drive industry innovation and decision-making for individual firms:

#1 - Increased focus on electronic communications between advisors and investors

The digital age is well upon us and we know that the regulators will continue to focus on all aspects of how your advisors communicate with your clients. Additional monitoring, compliance, and retention are just a few requirements that we can most certainly expect. Restriction of certain communication methods may be a ramification of our new digital era. For example, how can you be expected to monitor and store text messages between your advisor and client? Instead, you may be forced to restrict usage of certain communication channels altogether and increase penalties in an effort to safeguard your firm from litigation. For more information on this, you can refer to the recent SEC notice issued by the Office of Compliance Inspections and Examinations here.

#2 - Use of Artificial Intelligence & Robotic Process Automation

Robotic Process Automation (RPA) and Artificial Intelligence (AI) have been more ‘sci-fi’ than reality in the recent past. But we are seeing more and more serious, viable uses for RPA and AI to help in a variety of areas in our space. In the world of FinTech, RPA can become very useful in bridging the gap between true industry-standard, API-driven automation and “pseudo” automation (i.e. screen scraping) where no API exists. And, when used for these purposes, firms can safely increase automation across a wide spectrum of areas and drive real cost savings.

Similarly, AI can be extremely valuable in continuously evaluating data to become more predictive in how you do things. There are probably dozens, if not hundreds of areas where some level of AI could be useful: trading analytics, client prospecting, just to name a few. One such area that may be of interest to us at IFS in 2019 is Service Level targets. As an automation platform, we have data on how long it takes people to complete a given task. Maybe we should try to use that data to continually update Service Level targets for that task, allowing you to optimize your departmental automation over time. Something like this could certainly add value to your middle- and back-office areas, which would result in added value to your advisors.

#3 - Operational Efficiencies

We think there will be two key drivers for operational efficiency in 2019:

>> Innovation for the back-office

Historically the back-office has been an after thought when it comes to innovation, being forced to make due with spreadsheets and macros, while firms focus more attention on the revenue-producing side of the house. We're calling 2019 the "year of the back-office." Back-office staff need better tools to increase efficiency, accuracy and transparency. Doing so will drive real value to the advisors and will increase the amount of throughput in a safer manner, without necessarily adding head count. In a time of possible recession, firms are less likely to invest in human capital because of the long-term costs. But innovation and automation can be a more economical way to improve and scale the back-office to support the growing needs of the firm.

>> Creation of unified digital ecosystems

Similar to the aversion of investing in human capital to support back-office needs, we believe firms are just as conscious about the build versus buy decision when it comes to the digital tools needed to support their business. We think firms will be focused on creating more integrated ecosystems combining multiple products. When done well, this can be an excellent way to increase value without increasing your long-term cost of ownership.

In spite of the uncertainty and fears about market conditions, it's an exciting time for FinTech. Amidst the questions about a possible recession, FinTech providers offer real answers to future-proof your business. Let us know what your firm's goals are for 2019 and click here to see how IFS may be able to help.

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