Investment professionals are always thinking of ways to improve performance and efficiency. While these are pivotal to measure business growth and success, the digital transformation that is occurring across the capital markets landscape is evolving rapidly, and must not be ignored. The impacts that these changes are fostering can be immensely beneficial if they are properly addressed but could prove problematic if overlooked.
Let’s take a look at three key factors that will drive the evolution of financial technology and help ensure that investment firms are adequately positioning themselves amidst a shifting status quo.
First, investment firms are keen to leverage emerging technologies. However, most firms either do not have the workforce or the bandwidth to take on new projects; or they don’t have the existing rails in place to support these types of advanced fintech tools. These challenges make the adoption of new technology both very costly and quite challenging considering the sweeping changes often required from firms to take that next step in innovation. Without the appropriate personnel on-board to design, implement and roll out new solutions and upgrades, the burden becomes exponentially higher.
Finding a system that is advanced and flexible enough to integrate seamlessly into a firm’s current operations and data is challenging. When the human element is factored in, there is a significant amount of downtime that must be allocated to not only build the tools, but also learn how they’re used to maintain growth and capitalize on opportunities.
The second factor is that MiFID II has led to diminished research coverage for small and mid-cap companies, putting more of the onus on the buy side and corporates for direct communication and creating more responsibility for investment pros to prepare due diligence and publish their own research.
Corporate access meetings previously coordinated by the sell side will fall into the hands of the buy side. As a result, investment firms have both a greater need and appetite for streamlined technology tools to readily fill these gaps. Without a collaborative solution in place to catalog these initiatives and organize the increased responsibilities, there will undoubtedly be missed opportunities.
Finally, investment firms are actively seeking partners with which to collaborate. By leveraging their relationships across broker, corporate and fintech vendor partners, investment professionals gain a greater capacity of technical expertise and economies of scale to ensure solutions are more future-proof in their design.
By partnering with experienced professionals who understand the intricacies of the capital markets industry, investment firms can respond much quicker to their evolving needs. With the structural landscape of the industry and regulatory factors changing constantly, an agile and nimble approach with expanded market awareness ultimately creates greater scalability as the business grows.
Instead of investing in costly upgrades, it has and will continue to be more prudent for firms to collaborate more frequently and directly. Finding the right partners is going to foster the flexibility of fintech tools, drive the level of innovation across the industry landscape and help ensure that investment firms are addressing technology and structural movements as they unfold.
Monique Popli is Director of Strategy, Tier1 Financial Solutions