The days of large custodians employing thousands of fund accountants to process trades could be coming to an end if Northern Trust, which has $1 trillion in assets under management and $8.5 trillion under administration, has its way.
The asset manager has just launched an 'innovation laboratory' called the Fund Accounting Optimization Lab (FAOL) to look into how its back office functions. If this sounds ominous for all fund accountants, Paul Fahey, the head of insurance solutions at Northern Trust, insists it's all about doing (a lot) more with less and making the job more interesting.
“Technology has advanced to point that we can improve the speed and quality of what we do while making the job of fund accounting a role that moves away from processing to oversight and analytics,” he says. “The single biggest source of costs is manpower, so to make headway for growth, we need to make sure we can take on additional clients without adding more headcount."
The new innovation lab ticks all the IT workflow boxes by creating an "agile space" for 200 or so people across different functions at Northern Trust. Fund accountants work with technologists and business analysts with the shared aim of getting an insight into how they work now, and what needs to change, says Fahey.
“Typically business analysts come up with a set of requirements and the tech team builds something over five-to-seven months – is that what you want?" he says. “We doing that, in some cases, in a matter of hours, making changes on the fly and moving forward – it’s relatively new for us, but this is the way of doing business in the future and how we will conduct ourselves going forward.”
The ambitious goal is to double the organization’s productivity without adding headcount – essentially to accomplish twice the work with the amount of staff that the firm currently has.
Fahey says the fund accounting division is already 20% more efficient than it was previously and he expects that figure to increase to at least 25%, along with additional cost savings as it deploys new technology in offices worldwide.
Northern Trust recently deployed the first robots and integrated them into the process.
“There was skepticism that robots have a practical application, so it was a big success being able to go live with a robot, which is focused on fairly manual mundane tasks and being able to relieve fund accountants of that,” Fahey said. “That will alleviate some of the manual work that fund accountants were doing.
“In addition, we were the first to put a practical use for blockchain with PE clients,” he said. “Our model is proving it works, then spending four-to-five weeks expanding it across the business – anything happening in that timeframe in our industry is rapid, to say the least.
“The fear is that robots and automation will relieve humans of their jobs, but don’t get too concerned about the jobs piece of it today – this technology will enable us to grow our business in a cost-effective manner.”
Northern Trust is looking to hire business people who understand what technology can do and what its limits are, as well as technologists who grasp business concerns.
“The optimization lab is not just about tech and automation – there’s a human component, figuring out how we are going to organize the work and career needs of future generations,” Fahey said.
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