RE-WRITING THE SCRIPT.
Arun Sarwal, chief executive officer – investment management solutions (IMS) – DST Global Solutions explains how the company has been transformed.
How has the company changed since you took charge in 2009?
We have undergone a major transformation and restructuring of the business over the past three years to make it leaner and more efficient. We had provided services across the front, middle and back office but decided that the front office had enough players in the space and that there were more opportunities in the middle and back offices. The other major change is how we related to clients. Like many organisations, we became silo based and traditionally IT vendors have been more transaction rather than relationship oriented. We realised we not only had to engage more with clients but also to become much more accountable. I introduced scorecards with key performance indicators. The result has been positive both externally and internally. Our margins for key solutions have increased by around 40% over the last three years and the revenue generated by our top 20 clients has risen by some 25%. Internally, we are able to promote from within and nine out of our 10 senior jobs have been filled by our employees.
Who is your main client base now?
We have 260 clients with over 350 installations in 45 countries across all IMS applications. We serve four main market segments – asset management firms, asset service providers and sovereign wealth funds as well as wealth managers which is a fast growth new business area for us.
Why have you focused on the middle office?
One reason is the challenges associated with data management. The pressures from regulation as well as investor due diligence and operational risk mean that financial services institutions have to find a much more effective way to manage their day to day operations. Increasingly, the middle office which focuses on compliance and control, performance measurement and different types of reporting is viewed as the central point for all relevant information. They are being asked to facilitate the management, consolidation and delivery of business critical data. However, it takes time and money to invest in changing technology and we saw this as one of the biggest opportunities.
What new products have you introduced?
Two years ago we launched Anova which is a suite of investment analytics applications for the middle office function on a global operating platform. What we found in the asset management industry was that data in the middle office space was fragmented from both the geographic and analytical application perspectives. Another problem was that firms had developed a complex system of infrastructures and architectures derived from individual best of breed solutions. This resulted in a plethora of systems and solutions which caused inefficiencies, multiple points of potential failure and increased ownership costs. Firms wanted a single place for data and we developed Anova to address that problem. The platform can uniquely operate in a continuous processing mode for 24/7 “follow the sun” investment operations. Anova provides access to multiple analytical applications and data feeds using a single set of data. It covers all areas of middle office analytics – performance measurement, equity analytics, fixed income analytics, risk management and post trade and regulatory compliance. We also built the capability for role-based dashboards that enable firms to customise the data and manage their assets much more effectively. Users create their own dashboards depending on their particular functions and requirements. It offers the ability to leverage existing systems within a client’s operations with engines for areas such as cash flows, corporate actions and real-time investment valuations.
What about administration and your asset servicing solution?
HiPortfolio provides full life-cycle processing from order capture, through trade confirmation and transaction processing to accounting, financial analysis and tax reporting – for a wide range of instruments and tax jurisdictions. It is used by over 160 investment operations in 35 countries around the globe. Clients range from specialist management boutiques to the very largest global institutions and third party administrators with hundreds of concurrent users processing thousands of transactions and portfolios every day. We have also recently added new functionality and extended the depth to a number of key operational areas, including derivatives processing, reconciliation and unit pricing to offer operational efficiency and help deliver cost reductions.
Who are your main competitors?
Given the nature of data management, I would say it is the internal IT teams in the different institutions. However, when they started to look at the data challenges I think many thought they would have to start from scratch which was both costly and time-consuming and risky. Our proposition is that we have been investing for several decades in this area and we have a model that is able to maximise as well as optimise the data. We were also able to tailor it to their workflows and have worked closely with IT departments over several years in developing a data model based on best practice.
What are some of the major concerns that clients have?
When you look at the broad scope of data, scaleability is one of their major concerns. For example, one of our clients is a global bank in Asia which has several million accounts across nine countries and is targeting the mass affluent. They want to know that we can provide them with significant scale as their business grows. They also want a global operating model that runs 24/7 which enables them to pull investment and account data whenever they need to at any time.
What has been the impact of regulation?
Since the financial crisis, there have been several regulatory initiatives across the globe and they touch every part of the value chain. In the past, it would have just been the compliance departments which would have been responsible but today the whole organisation needs to get involved. The other impact is that all these new rules are data hungry and as a result financial institutions need to have information in an accurate and timely basis. As a result we have seen a real uptick in our business.
What has been the impact of the delays and extensions we have seen with certain regulations?
In some cases, the deadlines have been unrealistic and their full implications will emerge over time. We work closely with clients who need to respond, as well as with industry groups, to try and influence regulators to ensure that the implementation deadlines are practical. We think that there should be a more phased in rather than drop dead approach.
What are your plans overseas?
Asia is an important and growing market for us and home to a number of our key clients. We have been in the region for about ten years and are relatively strong in Hong Kong, Thailand, Indonesia and Singapore. We service more than 50% of the insurance market in China on our platform. Looking ahead, we are targeting wealth managers in Asia because of the increasing number of mass affluent. The same is true in Latin America and we are expecting to establish ourselves. We are also looking to expand in Africa – where we have already been established for many years. Africa is interesting also currently as there is an economic bubble growing across the region. This is particularly true in Nigeria, Kenya and Angola.[biography] Arun Sarwal joined the company in 2008 as chief executive for investment management solutions. He has around 25 years’ of global financial services experience with particular emphasis in investment banking, investment & wealth management and outsourcing. Prior to joining DST he was the chief operating officer at Scottish Widows Investment Partnership. During his career, he has worked in senior management positions with ABN AMRO, Société Generale and KPMG and has gained experience of working in over 25 countries. Arun is a Fellow of the Institute of Chartered Accountants of England & Wales as well as the Chartered Institute of Marketing. He is a Corporate Treasurer and has an MBA from Cranfield. He is the author of the International Handbook of Financial Instruments & Transactions. ©BestExecution