Determining scope of the AWD-concept, a product owners view (Part 1)

AWD Concept

Earlier this week Bricknode announced the release of the Account Worlds & Dimensions concept, AWD in short. During the development of a complete financial platform, like Bricknode Financial Systems (BFS), there is a constant battle going on with regards to how far the scope of the platform should stretch.

As the product owner of BFS this is one of my main issues to manage. Now, what do I mean by scope? Well, its not how many functions our platform should have but rather how far the platform should look into external accounts and how should it be used in terms of accounting. Before we go further into this topic I will start describing the main roles within BFS.

House

The House within BFS is the operator/owner of a BFS-instance. This is the company that owns the customers within the BFS-instance and who is responsible for everything that goes on. The House is the entity that exports accounting data files from BFS in order to import into its own accounting system and who is responsible for all client assets, settlement and reconciliation.

House members

A House member is someone who is using an instance of BFS and has a relationship with the House of the instance. For example, an Advisor managing customers and creating orders within the BFS-instance. A House member is also a company or a private individual who is a customer of the House. The assets of a House member that is keep within the BFS-instance is managed by the House but the House member might want to be able to extract their own accounting files for only their own account within the BFS-instance.

Providers

A provider of a BFS-instance could be a fund marketplace offering fund trading to the customers of the House, it could be a quote feed provider which the House has contracted with among other things.

These concepts are the pilars of BFS.

Please watch the following short clip about the AWD-concept before you continue to read more articles of this series.

Bricknode, enabling the future of social investing and online advisory

Investing and advisory is changing rapidly! For the first time since the dawn of online investing the financial services are changing from list based sites into more enticing offerings using the tools offered by social media.

An interesting article in Investment News presented examples of even the older generation moving to online services to manage their assets, read the article here.

2014-05-26_09-47-22Instead of having to select between individual stocks the casual investor looks to follow others and being able to invest in themes. A great example of a stock focused site for this type of investing is Motif Investing who has created a new type of brokerage firm around this concept.

 

This relates to all asset classes and not only stocks which is why Bricknode; with its broad API; can support financial service firms who wish to create their own concepts using Bricknode Financial Systems as the general framework.

Fully automated trading of mutual funds

A few weeks ago Bricknode signed a strategic deal with MFEX Mutual Funds Exchange as a customer and partner for offering automated mutual fund trading. Yesterday Bricknode launched its last release into a production environment and we are now looking forward to our next release which will include the first module involving MFEX.

Trading of mutual funds still poses a big problem within the technical aspects of securities processing since the back office process can be demanding together with various types of corporate actions.

By combining the mutual fund exchange developed by MFEX and the back office and customer facing capabilities of Bricknode Financial Systems (“BFS”) this partnership will be able to offer truly automated trading of mutual funds.

The most frequent question we hear from new customers of Bricknode is how the platform manages the fact that money is sent to the fund company before the actual execution report is received. The simple answer is that BFS works with account reservations on the end customer interface while tracking un-settled funds sent to the fund companies pending execution.

Stay tuned for release number 4 of 2014!

Facebook to become a bank?

A very interesting article was published in the Financial Times which was reported upon by various media like Veckans Affärer. Facebook could become the ultimate player within the financial industry who really understands how to use the Internet for conducting social banking and for the future maybe social trading?

Facebook has made a lot of smart moves lately where it has used its money to quickly make acquisitions instead of trying to develop everything itself. It definitely grasps the importance of time to market. With its global reach the company could become the fastest established financial institution ever. In an industry where numerous companies are struggling to establish a technical standard of their own and gain acceptance, could Facebook accomplish this by offering standardised banking API’s?

The next few years will continue to boost the financial technology shift into cloud solutions for financial companies and Bricknode is right in the middle of it!

Increasing need for technology providers to offer outsourcing and solutions

Financial service companies are increasingly realising that focusing on their core business while outsourcing everything else is the way to go. Recently there was an article on Finextra with regards to third party vendors within the financial technology sector and how a lot of financial technology can be viewed as a commodity.

Financial service firms are even realising that a lot of technology companies can add value by even working in their own systems on behalf of the customer instead of training the personnel of the financial service company. Last week offered even more evidence of this when the large mutual fund operator Swedbank Robur selected TradeTech Consulting as their outsourcing partner for working in SimCorp Dimension, read the press release here.

A financial technology firm or a company closely related and specialised on certain software platforms can most certainly perform a lot of tasks more efficiently than a financial service company.

Bricknode has monitored this trend for some time and last week the company launched two new offerings. Bricknode can now create both outsourcing setups and even act as solution managers on behalf of customers who needs help with creating processes, performing day to day operations or architect new system solutions.

Embracing electronic advisory

If you manage or own a financial advisory firm; or if you are running a financial institution with financial advisory as one of your business segments you should be reading this article.

Lets start by specifying some of your greatest pains with regards to your financial advisors.

  • Lack of productivity (revenue generation)
  • Fulfilling regulatory requirements (compliance)
  • Verifying advisory process (quality of service)

Now, lets address one by one and look at how I think technology can offer a solution to each one of them.

Lack of productivity

The absolute greatest challenge for a financial advisor is how to leverage their time and this is one segment where technology really can help.

A great example of this is the effort by Danske Bank to start offering eMeetings. By utilising technology in the advisory process you could have customers pre-fill a lot of the questionnaires which you need in order to conduct the advisory process. The advisory tool could then present a few default packages based on the economic situation of the customer in relation to their risk appetite.

A simplified advisory process could look like this:

  1. Book a meeting
  2. Send an electronic information collection form to the customer
  3. Automatically compute received information to arrive at advisory packages
  4. Review advice live with the customer through a web presentation

Fulfilling regulatory requirements

As a manager or owner of a financial advisory business you can never be absolutely sure that your advisors are fulfilling all of their regulatory requirements unless you have a strict technical process in place. Using a customer acquisition software service you could configure the process ad-hoc and get some ease of mind while at the same time increasing productivity.

Verifying advisory process

To build company value as a financial advisor you have to be able to measure the effectiveness of your advisory process while at the same time being able to replicate it throughout your whole staff of advisors.

You constantly have to develop and adapt your process to the changing needs of your customers and the global environment. By utilising an integrated cloud based solution you could constantly configure your process and measure the results for both your advisors and your end customers.

Bricknode has embarked on the journey of working with financial advisors in order to create scalable value and increase competitiveness among small and mid-sized advisors. Please give us feedback on our Advisory module and Customer acquisition module!

MongoDB replication providing continuous service during maintenance operations

We are running our production MongoDB replica set on Linux servers using the Ubuntu distribution. The other day we wanted to do some changes in our hardware configuration which would cause reboot of the servers. Before we used MongoDB for data persistence, we would have had to perform this maintenance operation at an hour with lowest possible usage of the system and we would have had to notify our customers and apologize for the inconvenience of the loss in service. The time of the day would probably have been really inconvenient for the guy performing the operation as well.

With the replication features of MongoDB we were able perform these actions during office hours by restarting the servers in the replica set one by one and no one noticed anything at all, except for us who were monitoring the replica set closely during the operation.

MongoDB replication will also allow us to perform “rolling upgrade” of our database servers, which will allow us to upgrade to the upcoming version 2.6 without any outage in our service. That suits us well, since we as far as possible want to keep up with the latest releases of the software we use in order always have access to the latest technology and to avoid accumulating “release gaps”.

Check out our whitepaper on how we migrated Bricknode Financial System from a SQL database system to MongoDB.

Financial advisors are forced to upgrade their business model

At least in the Swedish financial press there is a very hot topic currently being discussed with regards to the kickback-based business models used by financial advisors.

Today’s newspaper holds an article written by Christoffer Folkebo, the CEO of Max Matthiessen, a well-known insurance advisory firm. The article focuses on developing a standardised way for presenting all fees surrounding fund investments in a transparent way for customers.

I have previously touched upon this topic through various articles including “3 steps for surviving as a financial service company in the 21st century”, Thoughts on commission less world in our LinkedIn Group, Richard Leeson also wrote a good blog post on the topic titled “A Commission Less World”.

If for example kickbacks for financial advisors are to be banned the industry has to find a new scalable way of doing business. Obviously a financial advisor has to receive some sort of compensation for their work and the most transparent way would be to just charge a fee upfront for their services. If an advisor would charge for their hours spent only the very rich could afford having this type of service which means that the advisors instead could move towards implementing some sort of subscription model.

The next question one has to ask is what is the end customer ready to pay for? My response would be:

  • Getting an aggregated view of their financial life in one place
  • Being able to automatically act on certain offers and advice online without having to go to a meeting

By categorising customers in certain ways it is possible to automate some of the ongoing advisory process and by doing this the advisor would be able to scale out their services without selling hours.

In summary, all these events and business model adaptations are a testament to the fact that IT-systems are getting an even more centralised role in all aspects of the financial services business.

Points of interaction, part 1

As a financial technology service provider we often get asked where in the chain of software systems we fit in. In this era of holism it still seems difficult for financial service companies to grasp the concept of holistic thinking (think Apple). The notion that several systems would have to be used by a financial service company in order to run the business is obsolete.

We have previously discussed how a financial service company would have to think in order to survive in the 21st century and holistic thinking is the main point. Most of the IT-costs that occur within the financial industry have to do with integrations between various systems on the back end of the system. Back end meaning the “boring” connectivity, which just has to work in order to deliver at least some kind of service to the end user. The most back end focused organisms out there are the large banks and looking at their front ends (facing the customer) you can rather quickly grasp the fact that 99% of the money is spent on the back end!

The back end, or engine so to speak, should just work while firms should be able to focus on creating better products and a better experience on the front end for their customers.

In this first part of the “Points of interaction”-series we will have a look at some front end interactions to consider for a financial service company.

Pointsofentry

Order entry

This is the absolute most important interaction for a customer of your financial institution. This is where you have to manage customer worries like:

  • Am I placing an order for the right product?
  • Am I entering the correct price format?
  • Am I entering the correct quantity?
  • Am I buying or selling contracts, units or entering a sum of money to use for the order?
  • How long will the order be active?
  • What currency am I using?
  • What will happen when I click on the buy button?

None of these questions appear in the head of a professional investor, trader or even with an active individual investor but imagine someone who are only placing a few orders per year!

More often than not financial software is developed by professionals who do not consider these items. Because of this, you as a financial service executive have to demand this sort of thinking from your vendor. In order for you to increase the activity and customer engagement this process has to work seamlessly and it cannot be achieved if holistic thinking is not utilized.

Cash management

Your end customer has to be able to manage their cash very easily. Think about deposits, withdrawals and currency exchange among other things. Your customer should be able to handle these basic tasks without any hassle. They should not have to think about settlement dates following their sales and that you will charge them interest on deficits if they make a withdrawal before the settlement of a sale has occurred. The end customer has to receive this information in a very transparent way.

What are some of the questions that you have to address in this interaction?

  • Do I have to make any currency exchanges in order to withdraw my funds? If so, how do I do that?
  • Can I conduct real time currency exchange or when will the exchange be executed?
  • Can I make international transfers?
  • How long does it take to transfer funds in or out?

Reporting

The end customer requires a few types of reports to manage tax and monitor performance. Availability of reports should naturally be 24/7 and reports should be available for both advanced and basic users.

Instead of just presenting the customer with x-number of reports one could consider a more wizard-like approach where the customer could select which metric that is of interest or the actual need to be fulfilled. How does holistic thinking play into this part? Well, everything that occurs on the customer account has to be reflected in real time in order to avoid confusion, this means that you cannot use separate systems for the reporting but everything needs to be viewed as a whole!

Communication

This is where you as a financial service company have the possibility to really interact with your customer. You should be able to communicate with your customer based on what actions your customer has taken, what holdings exist or other types of information that should be available to you. Sure, you could work with a 3rd party CRM which is integrated or work with exports and imports of data between those systems but again, this would decrease efficiency and increase costs.

Use your holistic thinking here and demand a solution where everything can be done as a whole!