Specialist NZ consultancy firm, Mosaic Financial Services Infrastructure, has doubled turnover over the previous 12 months as the industry looks to install technological upgrades across the value chain.
Myles Allan, Mosaic founding partner, said growth in funds under management, ongoing regulatory changes and advances in technology had put pressure on legacy systems from the front office through to back-office services such as registry.
“NZ financial services firms are having to make some hard decisions around legacy technology,” Allan said. “There are only so many enhancements you can apply to low-scale, old and fragmented technologies. Sometimes its better to start with a clean slate than try to re-purpose old solutions which compromise you from the outset.”
However, he said most NZ financial firms struggle to find affordable off-the-shelf new technology that accommodates the broad range of activities they typically manage in-house.
“There is a niche here for more agile new-build or software-as-a-service [SaaS] offerings or outsourcing in a market with falling fees driven by automation and economies of scale,” Allan said.
In addition to replacing old back-office systems – such as unit registry of investment management platforms – he said NZ financial services operations were also on the look-out for technology to help cope with the onslaught of regulation.
Notably, the full implementation of the Financial Markets Conduct Act (FMC) last year and the impending reform of financial advisory legislation are driving the ‘regtech’ revolution in NZ.
The advisory reforms will also clear the way for providers to offer automated advice services, which Allan said most firms were already exploring in one way or another.
“Robo-advice is inevitable,” he said. “The sense is that if you haven’t already starting planning for it, then you’ve missed the boat.”
However, Allan said implementing robo-advice will require businesses of all sizes and market positioning to clearly map out an approach. As the reality moves closer, providers will have to resolve issues such as: the scope of the advice element; what investment products or services to include (eg, exchange-traded funds and model portfolios); how to ‘gamify’ or build goals-based advice at the front-end; the relationship between the ‘robo’ and human advice; and, brand implications.
“Businesses will have to consider how their existing advised clients react to a digital option provided by either by themselves or their competitors,” he said. “Wrapping all these complexities into a compliant, seamless, user-friendly technological parcel will take some organisational dexterity.”
While robo-advice will be one of the more high-profile IT challenges over the next few years, Allan said technology was disrupting most aspects of financial services business operations in NZ and globally.
He said the rapid growth of Mosaic over the last five years illustrated the high demand here for guidance on how to best meet that challenge.
Mosaic currently has six major projects on the go for a range of Wellington and Auckland-based financial services businesses, keeping its nine full-time consultants and network of contracted specialists busy.
Launched in 2010, the consultancy firm provides strategic insight and planning as well as business process change, IT solution analysis and implementation for wealth, funds management, custody, trustee and life insurance businesses.
Allan said the Auckland-headquartered Mosaic had recently added to its capability in Wellington.
“We’re also scoping out opportunities in Australia,” he said.