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Taming the Data Beast

How global custodians are redefining their sub-custody relationships to provide enhanced data for asset managers

Asset managers are digitizing manual processes and integrating their firms as they pursue meaningful data to make more informed business decisions in today’s highly competitive business environment. Global custodians have the opportunity to assist managers in harnessing the power of big data.

Access to the right data at the right time is paramount. In response, asset managers are employing advanced technology such as artificial intelligence and machine learning to leverage the growing stores of data that are key to building an efficient organization and delivering a unique product offering to their clients.

Nearly 80% of managers view “improving efficiency” as a top business priority

A recent survey of asset and wealth managers conducted by RBC Investor & Treasury Services (RBC I&TS)* indicated that nearly 80% of managers view “improving efficiency” as a top business priority and no less than 61% consider “digitization” to be a key technology priority as they search for opportunities to “tame the data beast.” 

Data challenges must be confronted head-on      

Managers face significant challenges given the reams of data that bombard their firms each day. While the limitations of internal legacy systems are a key contributor to the data challenge, a lack of global industry standards around data collection and management is also of particular concern.

 “The data challenges felt by asset managers are not going to disappear overnight," said Dan Hickey, Global Head of Network Management at RBC I&TS. “It’s important for global custodians such as RBC I&TS to lean into these challenges. We need to redefine ourselves and how we add value going forward, providing our clients with what they need.”

Global custodians are sitting on significant tracts of data from multiple sources, whether it be the assets they administer on behalf of their institutional investor clients, or the pricing and other data feeds received from external vendors.

A lack of global industry standards around data collection and management is also of particular concern

According to Hickey, one particularly important data source is the global custodian’s sub-custody network, which generally spans hundreds of countries across the globe.  Institutional investors require access to a broad range of global markets to meet their cross-border investment needs and the sub-custody network is key to facilitating these investments. 

“Traditionally, the network has been a collection of sub-custodians, each with a different set of processes that generate a multiplicity of unique data flows,” said Hickey. “This has been a key aspect of the data management challenge experienced by global custodians and their underlying asset manager clients—not to mention the increased operational risk resulting from these inefficiencies.”

Sub-custody partnerships can help smooth data delivery

Global custodians are beginning to look at ways to streamline the data flows with their sub-custodians and mitigate the related risk.  What if global custodians were to view their networks and the related data flows in a more holistic fashion? What if they were to develop partnerships based on best-in-class providers in a particular region, reducing the number of individual sub-custodian relationships to a handful of key partnerships?

Several years ago, RBC I&TS set out to do just that.

“It's important to have sub-custody partners with a strong commitment to their particular markets, including a desire to make the necessary investments in data and technology," said Hickey. "When our sub-custodians are willing to go the extra mile in integrating and consolidating data, you can start to think about how to more effectively communicate with one another and how to leverage emerging technology.”

By establishing sub-custody partnerships with five key banks, while significantly increasing network coverage to well over 100 markets, RBC I&TS effectively consolidated their sub-custody data pools. All of a sudden, the ability to standardize data flows and reduce the related operational risk became a reality.

Opening up new data opportunities for managers is key

“Standardization enables us to enhance the value of data for our underlying asset manager clients, including the ability to provide near real-time data on the status of trade settlements, complemented by information that helps to predict successful trade settlements,” said Hickey.

In the future, RBC I&TS plans to offer self-service, interactive analytics capabilities to their asset manager clients. The new network management approach also opens up opportunities to provide predictive analytics through cloud-based solutions or on distributed ledger technology platforms.

Standardization enables us to enhance the value of data for our underlying asset manager clients

 “Our objective is to get ahead of the market and bring the benefits of data to our clients quickly and efficiently," said Hickey. "No one wants to hang around and wait for the market to get aligned because it may well take a considerable amount of time."

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Sources

RBC Investor & Treasury Services (September 2021) Asset and Wealth Manager Survey