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We Might Need to Reconcile

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21 June 2017
Jay Wolstenholme

Notes from FTF Sec Ops Conference in Boston

Just got back from the FTF Sec Ops Conference in Boston.

Front-to-back asset management workflow was the main focus of the conference with some of the largest asset managers represented but also well represented by smaller AuM AMs.

It is amazing the range of technology that covers the buy side, from cutting edge fintech to AMs with less cutting edge technology that are still parsing faxes. Don’t get me wrong there is nothing wrong here; remember in business there are never problems just issues to be solved!

The major observation here is that while fintech players, as well as major incumbents, are addressing pre, trade and port-trade portfolio construction, analytics and risk with state-of-the-art investment decision support tools. Many asset managers are facing realities that core portfolio management and portfolio accounting applications are not going to be immediately replaced. Front, middle and back office horizontal silos and multi-asset asset vertical silos are a harsh reality still to be dealt with.

So when the panel on real-time reconciliations came around, not the most exciting topic in the world, the audience still wanted to know and gain insight how many of their colleagues were dealing with this reality. The old standbys persisted, data normalization, FIX/ SWIFT messaging standards, data stores, exception handling, recon centralization across the enterprise. Thank goodness it has significantly moved into real-time and robotics increasingly comes into play to automate the more commonplace exceptions. And of course, the third-party solutions and cloud implementations help greatly from the days when this all had to be built and deployed in-house.

While the vision and architectural goal of the perfected Investment Book of Record should still be pursued, much reality is silo’d fragmentation, nothing to avoid or despair over, just something that needs to be dealt with. The advances are coming by being layered on top of core systems, not by major rip and replaces and the glue that is holding things together is solid reconciliations. Someday there might not be any need for recons but we are certainly not anywhere close now.

But with that said remember the panel was real-time reconciliation, so of course, accuracy of recon is critical but now it better be in real-time or logically at any specific period of time you are just out of synch. Not a good state while trading or investing in today’s markets.