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Life in a post-MiFID II world with Julia Streets, Founder and CEO of Streets Consulting

Julia Streets joined the SimCorp Investment Summit last month in London, where she delivered a state of the union keynote on life after MiFID II, from data and digitalization to diversity.

The SimCorp Blog caught up with Julia, post the event, to garner some further pearls of wisdom from her on the global fintech landscape and hear her views on some of the findings in  the recent SimCorp commissioned WBR Insights report, Buy-Side Operations: Cutting Through Complexity.

SimCorp Blog: You covered a lot of trends in your opening keynote, from embracing innovation, digitalization of data, upping the ante on cyber security and commercializing diversity. A lot of this comes down to accepting change and adjusting mindsets. Is that change in attitude happening when it comes to addressing and consolidating the spaghetti infrastructure most buy side firms operate in, and moving away from the status quo?

Julia Streets: Tackling legacy infrastructure is a dominant theme across the industry and as we see more M&A in the industry, it only serves to further increase the complexity, as firms inherit and connect more disparate systems. As we heard from the audience and panelists earlier today, what we are now seeing is a focus on being able to automate as much as possible, to get true end-to-end Straight Through Processing (STP). This will deliver both the alpha that is so keenly desired, improve operational efficiency and contribute to enhanced profitability.

What are among your top strategic priorities for 2018?

Life in a post MiFID II world

SimCorp Blog: What’s prompting this change in thinking?

Julia Streets: To put it into context, we are now in a world where pre-tax margin profits have fallen to 22.4bps (2016) compared to the healthy 33bps pre-financial crisis (2007) *. Innovation isn’t a nice to have, it’s a necessity. For one, it helps firms manage costs such as Total Cost of Ownership (TCO) and optimize overall cost structures. Two, it helps to tackle the behemoth that is regulation. From being able to report and account for decisions made in the best interest of your end investors, to minimizing financial crime. And three, it gives birth to new business opportunities, product development and enhancing customer experience.

SimCorp Blog: You mentioned the financial crisis, is it surprising to you that ten years on in 2018, 79% of front office teams still struggle to get an accurate picture of their firm-wide exposure, and a centralized view of positions and market data?

Julia Streets: You’re right, and I think it comes back to the point about legacy systems, which are making operations today highly complex and challenging to navigate, particularly in the front office. There is a need for new ways of doing things and new processes that ultimately will enable firms to drive effective change management programmes.

What’s interesting is that there is a common appetite to improve now, as the WBR Insights report concludes. More so, because traditional sources of alpha are becoming ever scarcer and now lie in new sources and strategies, such as alternative investments, fixed income and FX. Accessing these asset classes often requires a different infrastructure. The change is also being driven by a desire for efficiency that can give firms a competitive edge in a highly competitive world. This is about doing what you do today, but better, and data is a large part of that. The agenda is once again about becoming fit for growth and capable of scaling. Thriving not just surviving.

The change is also being driven by a desire for efficiency that can give firms a competitive edge in a highly competitive world. This is about doing what you do today, but better and data is a large part of that. The agenda is once again about becoming fit for growth and capable of scaling. Thriving not just surviving. Julia Streets, Founder and CEO, Streets Consulting

What would you characterise as your top three challenges in supporting your front office staff?

Challenges

SimCorp Blog: Amid growing volumes, is data becoming too big a beast for today’s buy side operations? Are firms today able to harness data for alpha generation, or are most stuck in the quagmire of data siloes and fragmented systems?

Julia Streets: It may well prove to be a sharp learning curve for some, but with a keen appetite for performance and growth, those firms that can harness their data and advanced tech, like Artificial Intelligence, will gain the edge.

All of this comes back down to how you manage data. Some firms are embracing the digitalization journey, where they are investigating innovation including AI, to help manage and normalize data processes. Then there are the possibilities that storage, such as data warehousing and cloud bring to the data management game. Is there still a reticence, a hesitancy for some, towards cloud data management? Yes, but there is no denying that it is fast becoming a crucial element when it comes to alpha generation, whether that’s enriching and unlocking data analytics at speed and scale or identifying trading patterns and creating new lines of business. This matters, because the fundamentals of innovating come back to the need to centralize, govern and access a single source of truth.

The fundamentals of innovating come back to the need to centralize, govern and access a single source of truth.Julia Streets, Founder and CEO, Streets Consulting

SimCorp Blog: When we look at the buy side from a global lens, the WBR insights report finds that the North American and European buy side are conflicted in their views on the likelihood of market disruption, from the likes of Amazon and Google. What’s your view on this?

Julia Streets: These are two quite distinct markets in terms of size and investment product type, yet they have a similar appetite to compete and grow. Those who are ultimately successful always have one eye on what their competitors are doing. After all, you only have to look at the largest fund provider in China, Alibaba, arguably the equivalent to the eBay of investment products. Whilst these non-traditional competitors must of course be subject to regulation, the one thing I’ve learned in this industry is, never say never. One area that Google in particular could make a play for might be in indexing, because they have both the scale and data for it.

SimCorp Blog: Blockchain, AI and Robotic Process Automation are in the press almost every day. It appears as if the sell side is taking the leap, whilst buy side firms are starting to pay lip service towards these technologies. What is the reality? Are investments in these technologies being made and what value will they bring to buy-side operations?

Julia Streets: I’m certainly hearing cases where blockchain is being adopted and every day we hear of new use cases. AI on the other hand is still in the fairly early stages of consideration, but there are buy-side firms harnessing such technology for better insights.  On the sell side, many firms are already using AI for fraud, compliance and trade surveillance. Regulators are now looking at AI too, to manage their data.

SimCorp Blog: Cyber security is a topic you touched upon in your keynote. Can you share some of your views on this again?

Julia Streets: Absolutely, I was reading a report just recently where only 15% of the buy side participants asked, were confident about their ability to tackle cyber risk. This is at a time when we are seeing increasing attempts of cyber attacks. All institutions including tier 2 and 3 investment firms, not to mention wealth management firms managing the assets of High Net Worth Individuals should be on high alert.  If we are to tackle this head on, cyber security must be heeded as an organizationally aligned approach to threat management. Already the preserve of board room executive responsibility, cyber reporting and regulation is fast climbing to the top of the agenda.

Already the preserve of board room executive responsibility, cyber reporting and regulation is fast climbing to the top of the agenda.Julia Streets, Founder and CEO, Streets Consulting

SimCorp Blog: Diversity is a very important topic to you. Tell us a little about how you see diversity being best addressed in the investment management industry.

Julia Streets: It’s my strong opinion that diversity in a company, has a major impact on business performance. Recent research from McKinsey** shows that companies in the top quartile for gender diversity are 15% more likely to reap returns higher than their respective, national industry average. This is further improved in companies that fare in the top quartile for both gender and ethnic diversity, who are 35% more likely to have better financial returns.

Different ways of thinking, different backgrounds and experiences, offer different perspectives, to help create smarter strategies. They make firms consider new ways of working and importantly it stops group think. Firms need to nurture a culture that is fit for purpose today and tomorrow. To my mind, this is not so much a social discussion, it needs to be a commercial discussion. But diversity is also broader than gender and ethnicity, it’s also about age, sexual orientation, disability and mental health.

SimCorp Blog: And finally, we’ve been hearing great things about the DiverCity Podcast you produce. What’s the latest episode about?

Julia Streets: Interesting you should ask, we recently recorded an episode with Bev Shah, founder and CEO of City Hive, and Justin Onuekwusi, Multi Asset Fund Manager at Legal & General Investment Management, where we discussed the challenges and opportunities facing the Asset Management Industry. If you’d like to listen to it, click here.

About Julia Streets

Julia is the Founder & CEO of Streets Consulting, the UK and US business development, marketing and communications consultancy working with a wide range of financial services and technology clients.

Prior to founding Streets Consulting in 2008, Julia was Global Head of Communications at NYSE Technologies, serving on the Executive Committee and European head of Marketing and Sales Development at Instinet. In 2013, Brummell Magazine named Julia as one of their 30 Inspirational Women on Boards and in 2014 one of their 30 Inspirational Women Entrepreneurs. This year they listed her as one of their 30 Inspirational Women City Influencers. Whilst, in the past three years, Innovate Finance has listed Julia one of their Leading Women in FinTech and one of SWIFT’s Global Power Women in FinTech.

Resources

* Hugo Greenhalgh, Laura Noonan (13 June 2017) Profit margins squeezed at global wealth managers, Financial Times

** Vivian Hunt, Lareina Yee, Sara Prince, and Sundiatu Dixon-Fyle (January 2018) Delivering through diversity, McKinsey & Company

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