Here are some key quotes from my latest podcast with Mike DeSanti, President of LightPoint Financial Technology, discussing technology developments reshaping the middle and back office at asset management firms:

“It’s really hard once you kind of catch the technology bug, you really want to stay involved. It’s been tough. Every time I get out of it, there’s always something new.”

“With a lot of package technologies, it’s really technology folks that get together in a room and design a product. It doesn’t evolve in a real work-like setting. They design the product, build it, and then bring it to that setting versus having it actually evolved in that setting.”

“All this type of legacy technology was built inside of multiple silos. So accounting systems only had a loose coupling to things like an order management system, which only had a loose coupling to things like an execution management system, which only had a loose coupling to things like a portfolio management system.”

“And what that means is that you have, from an operational perspective, less fails in the back office.”

“The last probably six to seven years in technology has been as significant as my first 33 years in technology just in terms of the amount of open source software type frameworks that are available.”

“Other vendors can actually participate in that same ecosystem, and kind of seamlessly link their services with your services. For a customer, what they have is effectively something that functions as one product, even though there may be three or four vendors underneath the hood.”

“Middle and back offices tend to get smaller because a lot of the services that they performed internally for a given fund or institution are now being outsourced to a provider who does that for several funds or several organizations. And I think that trend is only going to continue.”

“I think what gets companies to look at this stuff afresh is this margin shrink. Then you have to look at the expense side of the ledger, right? So there tends to be periods of time when that’s happening, where if there’s pressure on returns, then people look at the expense side.”

“Oftentimes, when you’re starting up, you don’t need that much. So you really need to think about where you think you could be in four or five years, and kind of approach evaluating these systems from that perspective. And I’ve noticed a lot of folks don’t do that.”

“Once you can get integrated straight-through processing type workflows built and functioning in the system, then you can actually start looking at ways to leverage AI to monitor those types of things. And that’s a brand-new area. Nobody that I’m aware of is really looking at it yet.”