Legacy Portfolio Accounting Systems: A Closer Look

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    Just read an article in WS&T Online today regarding legacy portfolio accounting systems based on a survey from a buy-side portfolio accounting system vendor. Aside from the true nature of the survey (i.e. completely self-serving), the most interesting statistic cited was the fact that most of the firms surveyed had upgraded their portfolio accounting systems in the past 5 years.

    To say the least, this indicates a high overall level of dissatisfaction with portfolio accounting solutions in general, which is something that we see out in the marketplace quite a bit. I think the primary reason for this is that many of the firms surveyed might be using the dominant industry providers who market themselves as having “cutting edge” technology when they, in fact, do not.

    For the most part, these providers either have solutions with multiple silos, i.e. different databases, which increases operational and compliance risks and leads to many of the problems cited in the survey, such as lack of data visualization tools, limitations in setting up new securities, reporting, intraday account setup, etc., or they are the financial conglomerate companies that we have referenced in past posts that are really just placeholders within the company’s overall product offering. This does not even include the outright legacy systems out there, i.e. the “blue screens of death”, that have not been updated in 20 years and never will be because they have not kept up with changing technology, let alone changing industry needs, and are now impossible to modernize due to the costs involved in doing so.

    What this says about the overall state of portfolio accounting solutions on the buy-side is that, given all of the importance in having a strong foundation in place to cope with greater regulatory requirements, transparency, and the competitive nature of money management business, savvy firms will look to specialist providers whilst seeing beyond the marketing “hype” perpetuated by the large industry vendors.