How to leave a legacy in investment reporting

Abbey Shasore, CEO of Factbook

Changing the pattern of an asset manager’s thinking about legacy reporting systems will ultimately improve the business’s bottom line, but a pragmatic approach is essential.

Having the right software solution in place can help an asset manager streamline onboarding new clients, service existing clients, deliver customized service levels, and adapt to market changes while ensuring compliance. Hence, there is a strong correlation between an asset manager’s technology systems and their operational efficiency.

On the other hand, legacy software systems are often expensive to maintain, difficult to adapt, and challenging to replace. Often, they are the result of years of custom development, making the asset manager heavily reliant on them and reluctant to replace them, even when better technology is available on the market. In many cases, firms or key stakeholders may not fully appreciate the opportunity cost of sticking with the status quo.

When evaluating a new investment reporting application, asset managers need to recognize if they are using a legacy system and consider this when setting their objectives. Ideally, firms should accurately determine where they are in the ‘legacy lifecycle,’ potentially getting little return from their system, running high operational and key personnel risks, and relying heavily on manual processing. Additionally, asset managers who recognize they are using a legacy system must have realistic expectations about what software vendors can achieve in implementation timeframes when transitioning from an entrenched, highly customized legacy system to a state-of-the-art, highly automated investment reporting application.

When dealing with a legacy system, investment managers should also think beyond the scope of just investment reporting, as it may impact various functional areas across the front, middle, and back offices. They need to be pragmatic; for example, if they buy a modern investment reporting system and then integrate it with an archaic data management solution that may require a complete refresh in 18 months.

In terms of technology, the usual thought process within an investment management firm is ‘which functional zone will I invest in this year.’ System replacement can never truly be done in isolation, as the impacts will be felt both upstream and downstream in the portfolio lifecycle.

Here are three factors to consider when reviewing a legacy investment reporting system:

#1 – Don’t try to make your new application work like your old system

One of the biggest issues that investment managers encounter is when they try to make their new application operate the same way as their old system. Firms should take advantage of market best practices and features they didn’t have previously, instead of trying to make their new application merely replicate everything they did before. Setting a new Target Operating Model is key to this process.

#2 – One size does not fit all

Another problem some investment managers experience is when they try to make their new application ‘do everything.’ Aside from causing delays within the procurement process, this will create many headaches during implementation. Reporting requirements for an asset manager could include regulatory reporting, fund factsheets, client reporting, trade log reporting, transactional reporting, and a host of other activities. Not all reporting is the same, so asset managers must be realistic with their expectations.

#3 – Get buy-in across the organization

Firms must ensure they secure collaboration from groups beyond their obvious key stakeholders, to leverage the investment company-wide. These stakeholders should be identified as early as possible and long before any RFP is issued. We also often find geographic divisions within the same firm using very different reporting tools (some legacy, some more current), replicating processes that could readily be centralized. Asset managers should research to ensure that their enterprise solution truly serves the whole enterprise.

A key part of replacing a legacy investment reporting solution is to have a clear view of the data pathways. The old adage of ‘get your data right before doing your reporting’ is not necessarily a pre-requisite for a successful implementation today; asset managers will sometimes be running a data management project simultaneously with upgrading their investment reporting. Working on the two programs in parallel can have several positive impacts; for example, the asset manager can install data validation markers so that only approved data can be released into reports. The asset manager can also see an immediate, tangible return for its database project – the type of activity that tends to be less appreciated internally.

Changing the pattern of an asset manager’s thinking about legacy reporting systems will ultimately improve the business’s bottom line, but a pragmatic approach is essential to achieve this goal.


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