Low-code is the future – but it needs to understand our language
We recently had the pleasure of welcoming two innovation experts to our Genesis Expo: Olivia Vinden, director and head of fintech and innovation at Alpha Financial Markets Consulting, and her colleague David Nathan, associate director working on the strategy, design and implementation of technology solutions.
Olivia Vinden– Director & Head of Fintech and Innovation, Alpha FMC David Nathan– Associate Director, Alpha FMC
Vinden and Nathan talk to asset managers every day about their immediate and long-term strategic challenges – and both are keen advocates of the low-code approach to development to meet these challenges.
The three key issues that confront all Alpha’s clients are: growing Assets Under Management (AUM), preserving margin and regulation.
These are distinct yet inter-related challenges. While it is always great to win more business, losing control of margins or slack compliance management will quickly corrode such progress.
“The future of innovation is low-code.”
– David Nathan
First of all, how do you grow your AUM? “By winning clients of course,” says Nathan, “or by extending products, solutions and asset classes.”
The genesis Low-Code Application Platform (LCAP) can quickly support the extension of a buy-side operating model to support new initiatives and capabilities – be it countering the threat of passives to supporting ESG investments.
“The key word here is ‘quickly’,” says Vinden. “Getting AUM through the door is linked to enterprise agility, the absolute need to get the concept to cash quickly.”
Asset managers with a requirement that the existing operating model is not able to deliver have to go down the bespoke route. “You need something cost-effective, and something that will take you to market quickly so you beat the competition.”
“There’s going to be more competition over fees and so the operational efficiency of your model is critical.”
– Olivia Vinden
The genesis LCAP typically reduces development time by 80%. In a context where innovation is (almost) the same as speed of innovation, this offers firms a significant tactical advantage.
The competition over AUM is one of the factors putting pressure on margins. “There’s going to be more competition over fees,” Vinden predicts, “and so the operational efficiency of your model is critical.”
Enterprise-wide vendor solutions are by definition too inflexible to boost operational alpha across all buy-side activities. “Things fall between the cracks,” says Nathan. “Enterprise-wide platforms are great for the majority of the value chain, say 80%. But there are areas where they do not serve the unique capabilities of our clients. That’s where LCAP really offers a unique opportunity to close the 20% gap and provide a strategic solution.”
Alpha FMC recently used LCAP to develop a unit-linked pricing tool for one of its clients. “The vendors did not offer a suitable tool,” says Vinden, “but for our client this was a key differentiator and a key requirement. Low-code got them there quickly.”
Often the “requirement gap” is regulatory, with different geographies imposing different compliance standards which the enterprise-wide platform (often, a legacy system) cannot capture.
“MiFid II has been dominating the change agenda,” says Nathan, “and the pressure on firms to adapt to regulatory changes is not easing. We are likely to see new ESG standards emerging.”
Firms have to be agile in the way they respond to compliance, improve operational alpha, and innovate their business model.
“The problem in our industry is an over-reliance on cumbersome legacy systems, and on EUC,” says Vinden. “Asset managers usually do not have access to in-house full-stack developers who are experts in cutting code end-to-end. But this is what you’d need to tackle legacy and EUC.”
This situation is more likely to deteriorate than improve, as the competition for talented developers is fierce – and most are attracted by the bright lights of tech giants such as Google or Facebook.
“This is a great opportunity for low-code,” adds Nathan. “With this proviso: the platform needs to understand our sector. It needs to offer components out of the box that are specific to financial markets.”
An LCAP tool fit for the buy-side needs to have a detailed understanding of financial instruments, interface effortlessly with market data vendors, FIX, DTCC, OpenSource, Finos, OpenFin et cetera, and have prebuilt integrations to core applications in the asset management sector.
“And all that needs to be built for performance,” says Nathan. “It needs to process large volumes of data with low latency, providing a smooth and confident user experience across the tool [built by LCAP].”
“This is a great opportunity for low-code. With this proviso: the platform needs to understand our sector. It needs to offer components out of the box that are specific to financial markets.”
– David Nathan
Vinden adds: “Performance is one aspect of it. The other is security. As I mentioned earlier, our industry is over-reliant on Excel-based EUCs, even for some core functions. LCAP controls and de-risks these functionalities.”
Risk intersects with business agility. EUCs were built to solve specific problems at a particular time (often for a limited set of users) which means they do not scale. They freeze a business at a moment in time and stand in the way of innovation. “LCAP offers a much more centralized strategic solution,” says Nathan.
The COVID-19 pandemic is creating a context of great economic uncertainty and market volatility. “No one knows what is coming our way, but we know we have to be ready for it and adapt quickly,” says Vinden.
This makes LCAP a key strategic consideration going forward. “The future of innovation is low-code,” Nathan concludes.