Sramana Mitra: And they don’t have mature markets and trading platforms.
Skip Smith: And the data is kept in spreadsheets. There is no enterprise system that is housing this data. You have all these sources of manually created data, which we know has errors in it, and it gets aggregated into the central source. I think that is going to be critical [to find a different way].
SM: With all this being said, it makes me feel a lot less secure about money in general.
SS: It is amazing, because as I said, coming from banking, we went through this transition maybe 20 years ago.
SM: Banking and finance have been the earliest adopters of technology for the past 30 years.
SS: What happened is the short-sightedness of some people in this industry has caused them to say, “I can just add more people. It is the easier solution.” But now they have to think about being more innovative and strategic. I think that these innovative fund administrators who do that are going to drive new revenue streams we don’t even know about today – by leveraging the technology and getting that data centralized, who knows what kind of product offerings they can bring to their clients. The people who innovate on this will win this game.
SM: From what I am hearing, there are two key points. One is that the data and reporting infrastructure on the fund management side still needs a lot of automation and real-time processing. Second, on the side of the SEC and other regulators, there is the opportunity for automation in receiving the data – in creating platforms and standards on how to receive that data and rules engines and exception tracking engines to be able to act upon that data.
SS: I would add a third one. That would be managing the workflow between administrators, asset managers, investors and regulatory reporting bodies. There is a very manual process of routing this information, and I think there is a tremendous opportunity in automating and better managing that whole communication and workflow process.
SM: Where are you based?
SS: Confluence is based in Pittsburgh, [Pennsylvania]. We have offices in London, San Francisco, and also in Luxemburg.
SM: There is a lot more entrepreneurship going on in New York and London. I am wondering if there is anything going on around this problem area that you described. Have you encountered entrepreneurs who are working on this problem in New York, London, or San Francisco?
SS: There is a center for this type of stuff in Boston. I can’t mention the company’s name right now but you will hear from us in the near future of an acquisition we made of a company that is U.S. based. It is a young group of entrepreneurs we are acquiring because they have made some real progress in the management of regulatory compliance of investment space.