Reference data Systems – Legacy Modernization and Transformation

What is Reference data, in the financial industry?

The Industry Definition of reference data is that foundational data that provides the basis to generate, structure, categorize, or describe business transactions. The Reference data is the basis to view, monitor, analyze and report on transactions.  The below diagram shows that there are five main elements of a financial transaction some of the  

Drivers for Legacy modernization of reference data systems

Reference data systems are critical for a bank or financial institution and are the core asset of the bank. These systems should be adequately managed, governed, enhanced in a systematic fashion. The reference data system impacts all the operational functions of a bank. However when it comes to managing these reference data systems to drive the business; most of the banks/financial institutes are using on old technology stack.

With the continuously changing regulatory requirements, increase physical and information security challenges it has become imperative for the banks to use the twenty-first-century technology ; to simply management of the financial instrument, client and counterparty accounts, market data, historical transactional data information like the settlement instructions, etc. to minimize the risk by reducing the overall complexity

Key Points considered for defining the modernization initiative at any financial institution

• Decompose monolithic applications into discrete services and process flows by creating componentized applications and services which are agnostic in nature
• Architect for real-time straight-through-processing prefers to eliminate batch cycles which help in moving the system from EOD process to near real time process
• Segregation into business services and common services, which would decouple the core business service system with the common services. For example – creating a common module for tax calculation for different types of trades and asset service transactions
• Provide centralized user access/experience via Securities Workstation, which reduces the complex configuration management systems. Users should be allowed to login into multiple systems using single sign-on
• Business exceptions should be handled by a standard work-item management layer, having a proper workflow management system with 4 eyes (maker-checker) reducing the operational inefficiencies
• Data stored in a golden master database, creating a golden copy helps reduce the overall risk associated with the operational workflow and running predictive analytics on top of golden copy database would yield a better result with higher confidence levels

 

Abhinav Gupta

Future of Wealth management Platforms

The Customers don’t care about the platforms; all they care about is the services, experience and the reliability of the platform. 

Wealth management firms can no more compete on price, they are moving towards the value of outcome

Based on the key drivers of the wealth management business, below is the proposed business architecture for the wealth management firms in order to maintain the competitive advantage.

Forward thinking firms are combining both the client facing and back office technology to support multiple client and advisor segments

Making the customer experience and applying technology to improve it across various platforms would drive the long-term loyalty of the customer. The consistent customer experience across the various line of business is the key driver.

Wealth management firms struggle with silos of each product offering, as there is no integration with the front office to the back office application, making it difficult to maintain consistency – IBOR & PBOR solution would help them cover come the current problem

Apart from the customer wealth management advisory firms also needs real-time information and new ways of advisory life-cycle management, which would play an important role in getting more business and as the business grows, need to more sophisticated platform grows.

As the retail wealth management advisory models evolve to reflect increasing needs of the clients they bring more value added services to the clients, the firms at the same time need to keep a tap on the price of the wealth management platforms.

Today the clients are better informed and more technically capable than ever before, with the advances in consumer technology and the 24/7 news cycle enable seamless and almost limitless access to markets information to the clients makes it more and more difficult for the traditional wealth management advisory firms

Product Management Myths and Reality

What has changed, over the years, in the technology industry; which required a role of a product manager?

I did not hear the designation of a product manager 10 years back, there were business analysts, project managers but not the product manager. There is an argument, that somehow end-user needs got detached from the technology-driven product. The product manager enables a company to rapidly deliver products to market since it skims and skips lengthy traditional market research, and consequently bases product design decisions on internal company expertise. Probably yes the business has been changing so rapidly which required this as a specialized role.

So who is a product manager? A business analyst, UI/UX expert, Technology expert, Project manager, Sales associate, Network specialist?

I think the answer is none of them, the commonly used a vague definition of product management misleads and allows many people to place their own personal interpretation on the role of product management, and this is leading to a multitude of diverse definitions in the technology industry. As a product manager, you need to be the like the conductor of the orchestra. You may not know which API’s to call, which would be better to have a server hosted application or a cloud platform, does the customer care about all that?  The Product manager should be as a voice of the customer and should be ready to take tough calls, he should be creative and clear in his ideas and politically correct to get it implemented, should be listening to thought but at the same time should the person who would call the shots.

Does the definition of the role of a product manager in my company same everywhere?

Every company is different and handles product management differently – meaning that the product management discipline is not standardized as much as it could be across the high-tech industry. Further complicating the situation is that in each company there are individual stakeholders who often view and interpret product management very differently from each other. Based on my conversation with various product managers working in different companies, some say that they have been recurrently successful as product manager while others said that they have been just lucky till now, but now they are working on having a consistent understanding of the product management in the organization.

What do you understand by Product manager as the CEO, of the product?

This statement is been used quite often in various blogs, talk’s and books. The product management comprises of all the activities that are responsible for the product to be successful in the market. For example, providing incorrect market requirements, erroneous pricing, or an inaccurate profiling of the target market can all be detrimental and critical. If just one of these aspects of product management is a miss, then the product’s chances of success are greatly diminished and who shall hold responsibility for the failure of the product; The Product manager! And it’s his responsibility to fix it.

How important is the role of a product manager in making a product successful?

Some products are successful because of external factors, timing, or merely good fortune. Not all successful products have had great product management behind them, but it is clear that many product failures have had poor or no guidance from product management. Numerous cases where companies like Google, Apple, JP Morgan’s and Microsoft failed and the most decorated product managers were needed to step down whether it was Apple map or google phone.

 Is it necessary for the product manager to be an Agile/Lean/RAD/waterfall expert?

Well, there is no right or a wrong model for a project, there are instances where the agile model may lead to budget overruns due to continuous change in product requirement, despite having the most amazing product the time to market the product led to product failure. I think everything works, even tossing a coin before choosing the model of development might work for you, but you need to make it work for you.

To conclude, I think there is an increasing need for standardizing the product management as a discipline, and every dollar that a company earns through product development some portion of that dollar they should reinvest in improving the area of product management. Efficient product management practices within the organization increase product managers on job productivity and improve a product’s chances of commercial success.

 

Robo-Advisory vs. Human Advisors

A simple question

If you had a problem or a goal in mind, would you want a series of checkboxes, questions, telephone prompts or a real person to assist you?

The automated response system may include perhaps a dozen issues and solutions, based on algorithms, which are supposed to meet the needs of most people. A real person can give you real-time responses, specific to your questions when asked with accurate answers.

The financial advising industry has been buzzing about the emergence of Robo-advisors for the past few years as web-based advising companies, with the new technology stack most of these companies like the Vanguard’s, Wealth-front, bigdecision.com, etc. have either acquired or developed Robo advisory platforms, spending millions of dollars. These online tools attempt to create and manage a client’s portfolio in a fast and inexpensive way.

Why and How Robo-advisors came into existence?

Historically the problem with trying to get an FIA was many have minimum asset requirements of $500,000 or larger and it is not uncommon for FIAs to charge 1-2% annually (or greater via the loaded investment tools like Mutual funds entry and exit loads). That is 1-2% you have to do better than the market just to keep up.

On the other hand, Robo-advisors manage portfolios automatically, with their decisions driven by the algorithm. Most Robo-advisors include portfolio rebalancing. One, Fidelity’s http://www.futureadvisor.com, would do the tax harvesting and reallocation for you for a 0.5 percent annual fee.

How Robo-advisors do it differently.

Let me try an explain using a simple example

When you do to buy a pair of denim, you essentially speak to the sales guy and just mention the waist size and the fit. They give you an option of 5 types of denim from different companies, but the ultimate decision is yours that which one you want to buy; this is similar to human FIA.

On the other hand you entered a showroom and based on your physical appearance and your choice the computer takes out the best denim suitable for you, now that is Robo advisory. The Robo-advisory work on a concept of “One Size that fits most of the people”

The computer is learning every time based on the historical data, assets performance, your choices and choices made by other individuals having similar risk appetite. The Robo-advisor changes the asset allocation automatically, where the investor does not have to make the asset allocation decision every time all that at very low fees compared to the human FIA.

Typically, these types of accounts can be compared with the Managed accounts that FIA manages wherein the FIA gets an amount from the investor, and the FIA takes the decision based on the market dynamics, the investment decision or asset allocation are completely based on the FIA experience. FIA may charge the end customers a standard fee 1-2% and a percentage of net profit of the portfolio.

Does Robo-advisor suit you and your dad both?

Firms like Betterment.com focus on the end-goal and is ideal for individuals who do not care or want to learn about the details of investing. For these people, the 35 basis points (or less) they pay is well worth the fee, and in many cases much better than hiring an FIA — both regarding cost and sound financial advice.

In my case, most of my assets are “Do it yourself” (DIY), but I’ve also been studying this for years and feel comfortable buying insurance, mutual funds and stocks myself. On the other hand, my dad may not log-in to his online account and would call up his FIA and get his insurance done.

Most of the Robo advisory platforms work on the Modern Portfolio Theory and the tools robot-advisors offer aren’t new, however. Traditional financial advisors had the same tools available to them for years and could roll up a personalized asset allocation plan unique to you.

How to choose a Robo-advisor for yourself or family, what things you need to consider?

Below are some of the parameters that you should consider while choosing a Robo-advisor and compare it with the Human FIA

• Minimum Deposit – Some firms you can start out with nothing and others require sizable amounts to start with.
• Annual Fees – Be aware of hidden costs, portfolio management fees, mutual fund entry/exit loads, ULIP management fees etc.
• Asset Allocation – Does it offer all different products like Insurance, Mutual funds, Stocks etc.
• Account Type Support – 100% automated vs human assisted advice
• Tax Optimization – Does it give services like Tax-Loss Harvesting, Tax planning, Tax reclaims etc.
• Retirement planning only or supports other short term goal based planning
• Managed by you in which they give trading advice, or directly by the firm
• Manage all your assets or just a portion

Although there are a few obvious perks/benefits of the Robo-advisor model, there are undeniable advantages that human, financial advisors bring to their clients. The Gen X may feel comfortable using an online tool to manage their money; however, when it comes to taking major decisions involving larger some of money and longer commitments they like to ripe for a face-to-face financial advisor.

I think, looking at the current capital markets and availability of Robo/RIA tools, and the individual investors the hybrid approach is would be appropriate where the Robo-advisors take over the day to day portfolio’s asset allocations, and the humans take up when building a new wealth management portfolio for an investor.

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Abhinav Gupta

Certified Financial Planner (CFP)

Original Article (PDF)

ROBO VS HUMAN Article

What steps can Business Ops and Technology department take to achieve synergy and agility?

Primarily the Operations and the Technology departments are working in silos in any organization, both operations, and the technology has multiple global stakeholders requesting for product or process enhancement. It’s hard to get a holistic picture of the product issues for a product and the process manager due to the agility involved in the highly complex process and products.

The stakeholders share their strategic product “needs” directly with the technology for example in the case of any regulatory enhancement this would directly come as an enhancement request to the technology dept. Whereas what the business “wants” for example a report, or some data element on a screen comes from the operations user to the technology dept.

Creating efficient process is now a key concern for business managers and technology architects, and there is a need to respond to disruptive innovation in the Financial Services sector. The technology dept. needs to support growth and return to the emerging “customer centric” world versus the traditional “product-centric” view.

What is needed? And how?

• Cost efficiency via standardization
• Faster time-to-market through deployment of integrated and tested components
• Better operational control and Transparency through operations tracking and built-in performance measure
• Standardization and use of best practices for product development and process optimization. Various departments need to share their best practices and success stories with each other and share the utilities that could help in improving the overall process.

 

To have a fully integrated product and process solution there has to be a constant feedback between the ops and the technology department. Both the ops and the product development should use the same tool for incident management to get the holistic picture of the current state of the business, ultimately both the business goals and the technology goals need to tie to each other.

Abhinav Gupta

Public Profile –

https://in.linkedin.com/in/abhi13aug

Twitter @abhi13aug

Correlation of Age and Success….

Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time – Thomas Edison

90% of the startups close before their first anniversary, “one success takes you one step forward towards making it big and one failure takes you ten steps back”, as you have lost some money, zeal and time.  

Working in an agile environment of the startup it is a massive transition, definitely requires more than a year of time and double the number of hours you usually work in a structured environment

I think the probability of success could be more if you start early

• Age 20 – 27 years- Fresh blood, lot of energy, can take max. Risk, unmarried, they have “no other choice” to make it successful, which is the best and the strongest feeling to have, something like we have it just before the exam if I don’t do it now, I would fail.  I had an interesting conversation with my boss ten years back which changed me forever, I went to my boss and said that this is too much work, and can’t do it because I have no knowledge, and time is very less, my boss told me

You are an engineer and I think you might have never opened the book before the prepration leaves and you got a first class degree. Just put that effort today you will get there…

• Age 27- 40 years – This is the most difficult age group, they are married, they have responsibilities, they have EMI’s to pay etc. They are trained to do certain things but not all, they“have the choice”, they have the choice of returning to your job if the startup does not work. The right thing to do is to have a group that complements each others skillset.

If you can’t fly then run, if you can’t run then walk, if you can’t walk then crawl but keep moving forward – Martin Luther King

• Age 40 + years – This age group is more seasoned, have a good network, they were trained in managing people, they are more financial stability, they “have the choice” and can bring stability, maturity and scalability to a dynamic startup.  

Anyone who has never made a mistake, is the one who has never tried – Einstein

These are my thoughts; please share yours in comments below..

Abhinav

“Ashwatthama was dead”

Lord Krishna knew that it was not possible to defeat Dronacharya when he had bow and arrow in his hands. Krishna also knew that Dronacharya loved his son Ashwatthama very dearly. So, Krishna suggested Yudhishthira and other Pandava brothers that, if he were convinced that his son was killed on the battlefield, then Dronacharya would be desolate and would disarm himself in grief.

 

Lord Krishna suggested that Bhima kills an elephant by name Ashwatthama and claim to Dronacharya that he has killed Dronacharya’s son Ashwatthama. After killing the elephant as suggested, Bhima loudly proclaimed that he had killed Ashwatthama. Dronacharya however, did not believe Bhīma’s words and approached Yudhishthira. Drona knew of Yudhishthira’s firm adherence to Dharma and that he would never utter a lie. When Dronacharya approached Yudhishthira and questioned him as to whether his son was dead, Yudhishthira responded with the cryptic ‘Ashwatthama is dead. But it is an elephant and not your son’. Krishna also knew that it was not possible for Yudhishthira to lie outright. On his instructions, the other warriors blew trumpets and conches, raising a tumultuous noise in such a way that Dronacharya only heard that “Ashwatthama was dead”, but could not hear the latter part of Yudhishthira’s reply.

Out of grief, and believing his son to be dead, Dronacharya descended from his chariot, laid down his arms and sat in meditation. Closing his eyes, his soul went to Heaven by astral travel in search of Ashwatthama’s soul. Dhṛiṣhṭādyumna took this opportunity and beheaded the unarmed Dronacharya.

Correlating this story with a Real Life

As a sales personal, you are always under pressure to generate more and more revenue for the company by selling the product to the clients. I think you need to act as Lord Krishna as your dharma tells you to get more wins for your business. You are not lying but making sure that your side wins.

Someone may question that’s not ethical, but the hard truth is you are evaluated based on the how many success stories you have under your belt.

If the customer is informed and ask’s you the relevant question you don’t lie then..now that would be unethical if you lie then. If you listen to the ads of a ULIP, just imagine if the sales personal tells u upfront that out of your Rs.10000 yearly premium we would invest only Rs. 6000 in the market and the rest is our fees, would you take it?

It does not mean that ULIP is not good and does not yield good returns; they always talk about return on investment so that profits would come on 6000, not on 10000. If you understand ULIP plans in India and the first question that you ask is what is the fund management fees for the first year and the 2nd year and give me the prospectus that states it he can’t lie.

 

3 D’S OF PRODUCT MANAGEMENT – DISCOVER, DEVELOP AND DELIVER.

Discover –  Selecting the new product opportunity

Opportunities abound in this world of ours! The challenge is to select and focus on the ones that will yield the desired result. However, what is the desired result for the company?
Does it result in revenue generation, cash flow, or profit, or does it represent tangible, long-term growth for the company, strategic positioning, and operational requirements?  Is it achievable, desirable, and agreed to? You need to know your customer, your target market and the competition as a product manager do as extensive research vetting out which one you want to pick

Develop  What’s the STRATEGY – One Time Hit or Steady Game?  

 

 What makes you think that this product would take off?

 

Few products can succeed as a one-time hit without a subsequent market and product development. It simply puts the organization in a market position that is not defensible. But having said that a single success can not and will not remain in the market for very long uncontested, someone would copy the product add some new features and “RISE OF COMPETITION”, thus necessitating the need for continued development as I think both Innovators and Infringers have their own space,  and both are creative in some sense or the other, Most of the new startups in India have been exact or similar to startup’s in the US, whether it was #Flipkart or #OYO rooms, still creative enough to make an impact.

 

DELIVER – HOW DO YOU HOOK THE PRODUCT IN THE MARKET?

Every product has a distinct  marketing feature, as a salesman you would never go to the customer and tell them that our product is exactly the same as the other, You would say it’s similar, but has this more functions,  cost less, easy to use etc. etc. are all product design tactics designed to make the product more marketable.

Need to find the HOOK, that generates sales and deliver Return on Investments (ROI).

Customer Experience 2.0 would change the world

Something that would be defining the next leap .. would be building customer relationship, traditionally we have always thought relationships needed to be built on a face-to-face basis, that is why most of the business in early 90’s and 2000’s the way the company can capture more business is to open more and more branches whether it was a bank, a food joint or a fashion brand each one of them opened more and more branches, lately more and more banks have been closing the brick and mortar branch, food joints move to the model of a central kitchen and delivery at doorstep..

The younger generation is more likely to find and trust information received on the social media, banks started using twitter for money transfer, for me it was a surprise, I never thought it would be secure, the key reason why banks were able to go with this strategy was “business was able to establish a relationship with the customer”.

 The game changer would be …Customer Experience…

The customer experience is the key differentiator, the fact today some of the startup were able to make big names because they have a great customer experience, but if they drop the ball, so to speak, on another channel, then all that good work is immediately going for big zeros. The customer would abandon them very quickly, customers simply don’t think about loyalty anymore, so neither should the company, it’s about customer experience and they want better experience every time. The customer of this digital age has the power of greater choice, greater access, and faster, more efficient modes of delivery and service.

What’s next…..Breaking the Silo’s.

Most of the channels of recording customer experience are in Silo’s today, the company don’t share the customer experience their spending trends, interest trends etc. with each other as a result most of the remarkable opportunities goes missing or without much impact. Just imagine amazon, Flipkart and Snapdeal sharing the customer learnings with each other, what a new experience it would be, we would be able to guess what would be the top selling products in the market this season. What product would take off and what would not, the opportunities are limitless.

Most of the changes that are happening in the digital marketplace are happening in isolation of the customers, customers are not involved. The proposed solution is to Break the Silo’s as the customers don’t use a marketplace in isolation they use it as an integrated shopping avenue, In case I want to buy a mobile phone I may go to Flipkart, if I feel like buying a shoe I might go to amazon both sell both mobile and shoes, customers choose the channel depending on the number of factors such as time constraints, availability and likelihood of getting a good deal.