Mar 17th 2017 - by David E. Fred
Editor's Note: We are thrilled to have David E. Fred guest blogging for us. David is a 30 year financial services veteran with deep experience in due diligence and research with large broker/dealer and RIA platforms. He has been a rich source of insight to us as we continue to build technology to enhance the investment research landscape.
Making an investment in your future or to reject staid processes is critical to the evolution of your business, the services you provide to your customers and the way you manage personnel and processes internally.
Even if you invested in significant technology improvements, these improvements are only as good as your ability to utilize the technology and are measured by ROI - price vs. performance, efficiency, speed, and flexibility. Financial services incumbents are reeling under competition from startups, changing technology, user, client and customer landscapes. Service providers and financial services incumbents have no other choice but to change to a new paradigm and behave more like technology companies.
"As such I come to the natural conclusion that Finserv = Fintech. Every participant in the financial services industry – new or old, small or large, startup, incumbent, service competitor – will have to be, if not already, a fintech participant. Incumbents will have to become fintech incumbents. Banks will have to become fintech banks.” 1
The pace of technological advancement, which in itself is accelerating at an exponential rate, will virtually guarantee you’ll be spending more money sooner on new technology, due to obsolescence. So why not rent the capacity for certain of your technology requirements? Even if the technology hits its theoretical growth limit (and it will), there will be a new paradigm that will enhance current technology and shift development to a new path of accelerated growth.
Let’s relate this to the investment research process. Relating back to our cover photo, in any investment research group in any investment firm and you will literally find piles of paper, pitch books, collateral research, follow-up notes, and a multitude of items to be reviewed, analyzed and compartmentalized. Let’s call these "Inputs".
Once you have all of the Inputs (also included notes from telephone calls, face-to-face meetings, analyst meetings, side conversations with other analysts, etc.) what do you do next? Historically, we literally spend hours, upon hours, upon days, ensuring that all of our Inputs are assembled, assimilated, sorted, and codified into some hierarchy that will provide for rapid recovery, assembly, production and utilization – namely some version of a hierarchical file system containing drives, folders, and files displayed in an operating system. Let's call these "Outputs".
Ok, now calculate the ROI of the Outputs. My guess is the ROI is very low when comparing price vs. performance, efficiency, speed, and flexibility. I’ll bet you also have heavy staffing overhead in areas of word processing, file and document management, retention and storage and a host of other related or tangential activities.
As I look around the industry for solutions to solving the management of research functionality, there is a new and fresh entrant to the FinTech landscape.
RedQuarry has engineered a revolutionary Research Management Software (RMS) that provides for standardized and consistent processes that are used across the entire organization. RedQuarry provides a B2B solution (and has the capacity for B2C versioning) to control access, archiving and retention of data and information, collaboration within teams or across teams, compliance management, document assembly, document conversion, document delivery, email management, full text search and version control.
Even at this late stage in the implement (or not) of the DOL fiduciary standard, many firms have already drawn the line in the sand and are moving forward with implementation. Planning actions taken today MUST include the “inevitability” that some form of fiduciary guidance will be implemented. Firms ignoring this are missing an opportunity to take advantage of disruptions in the manufacturing and distribution channels to deliver a strong marketplace message.
Certainly, regardless of how far or how much you choose to implement a fiduciary process, key and core is your ability to produce documentation in support of such. While there is a wide swath of areas that could be addressed, this vignette focuses on investment research and product selection, which, some could argue, is the foundation for much of the ongoing debate around prohibited transaction exemptions, conflicts of interest, and the evaluation and monitoring of investment options. RedQuarry’s solutions offer strong fiduciary control processes while allowing firms to show regulators a documented and repeatable process.
Is the application significantly different from other competitors? Yes. There is no other application like it in the FinTech space.
How does the application make people’s lives better? Price vs. performance, efficiency, speed and flexibility are immediate, but also overhead and personnel could be applied elsewhere in the organization or eliminated.
What great new thing does the application offer that will keep potential customers engaged? Outsourced, continually updated and enhanced technology, unlimited archiving, ease of use and design flexibility allows users to customize.
How will the application save potential customers money? Elimination of overhead and personnel costs, elimination of technology support and re-engineering of internal systems, speed to market and an outsourced solution that will keep pace with technological advancements.
David E. Fred is a 30 year financial services veteran with deep experience in due diligence and research with large broker/dealer and RIA platforms and understands the collateral processes outlined in this article. Email David
RedQuarry's cutting edge research management software is used by leading investment firms around the world to manage their investment process, due diligence files, documents, reporting, and research compliance. Contact us for a demo