Juggling financial workflows is often an area of significant friction for any young business, with digital solutions opening up new avenues to optimize and automate. For investment managers, however, managing finances isn’t merely a headache: it’s filled with complexities that are made even more complicated due to the regulatory-intensive nature of the industry.

Especially for funds that are just starting out, juggling financial management with compliance — all with limited resources — has become a major roadblock to success and growth.

Sean Wilke, partner at Greyline Partners and head of its newly-announced GCM Advisory unit, says there is a convergence occurring between finance and compliance operations that is adding operational challenges for investment managers. Speaking with PYMNTS, he explored how a combination of technological adoption and outsourced services can help funds achieve the level of operational excellence they need to thrive, even during a pandemic.

Finance And Compliance

Though historically seen as two separate functions, finance and compliance are converging thanks to the evolution of the regulatory landscape in the investment management space.

According to Wilke, Dodd-Frank reforms in 2010 led the Federal Trade Commission to pay closer attention to fund managers and their internal operations. Regulations surrounding expense allocation, internal filing requirements, and fund sponsors’ adherence to offering documents are just a few examples of how investment managers have faced intensifying compliance requirements over the last decade.

But that growing compliance burden doesn’t solely land on compliance personnel.

“They are compliance requirements, but they are largely contingent on the accounting and finance function actually providing the data necessary to meet those compliance and regulatory deadlines,” Wilke explained.

All of this can create operational friction, particularly, he added, if investment managers don’t set up internal infrastructures and workflows that can support this interconnectivity between finance, accounting and compliance from the get-go. No longer can operations occur in silos; rather, functions related to finance and compliance must work in harmony to ensure the proper checks and balances are in place.

The Digitization Opportunity

Compliance workflows can be a significant pain point for entities in highly regulated industries, particularly among smaller or younger firms. When resources are tight, dedicating time and staff to regulatory processes can mean taking valuable time away from more strategic initiatives.

Easing this challenge is often a twofold process for investment managers.

On one end of the spectrum is the opportunity for digitization to integrate automation for many processes in support of both finance and compliance management.

“There has definitely been motivation for managers to adopt technology,” said Wilke. “The investment industry is not always the first to adopt technology and adapt to change — it can really be set in its ways.”

But, he added, the global pandemic has pushed the sector to step into a more modern landscape. Automated solutions can digitize what are typically paper-intensive processes, including code of ethics and brokerage statement document management. No longer can employees simply step across the hall to collect colleagues’ documentation and paperwork. Today, digitization is the way forward to not only streamline work in a remote setting, but promote compliance at the same time.

Looking Outward

While digitization within a fund’s four walls is an important strategy, Wilke also pointed to outsourcing as a key opportunity for firms to take a fiscal approach to optimizing workflows that blur the lines between finance, accounting, compliance and operations.

Greyline recently announced the launch of a new unit, GCM Advisory, which offers outsourced services for investment managers that holistically address needs for chief financial officer (CFO), accounting and chief operating officer (COO) leadership.

Outsourcing can introduce significant cost savings for investment managers that may be too small to need a full-time CFO or COO, for example. By combining outsourced expertise as well as technology to streamline and automate workflows, the challenges resulting from the convergence of finance and compliance can be significantly more manageable.

But, there is more work to be done, said Wilke, with areas like trading and financial reporting still ripe for digital transformation and optimization.

“We will continue to keep our finger on the pulse as to what people are asking for,” he said.



About: The PYMNTS Subscription Bundling Report, surveyed a census-balanced panel of 2,962 U.S. consumers to gauge how their attitudes toward bundled subscription services have changed during the pandemic, especially those offered by companies in the streaming sector. The report also examines how the knowledge that a COVID-19 vaccine will soon be available throughout the U.S. could affect their perceptions.