FUNDS EUROPE: What role will distributed ledger technology (DLT) play in improving automation rates?

GLYN: The mutual fund product and its structure have been pretty much the same since 1924, when the first mutual fund came out. Apart from the advent of ETFs, there hasn't been a tremendous amount of innovation for 100 years.

Also, Citibank said that it costs them 8,000 times more to process a fund than equity.

We will see new technology, like DLT, not just enable the digitalisation of the current supply chain but also be used to radically alter the structure of the product itself that uses that supply chain. You will have a digital representation of both the product wrapper as well as a digital representation of the underlying assets within that wrapper.

"The technology could certainly help with processes like KYC and the ability to validate information in real-time."

WEBBER: What we've just described will take a really long time to enact in full across our industry if we use the last 20-30 years as a yardstick, but if we were to start to consult about DLT as an industry, the area that I think it could really help in the short term is around settlement and tokenisation around settlement.

We've got to improve our settlement processes. Let's not just push DLT into things that work, let's push DLT into things that really don't work today, and settlement is still one of those areas as an industry where we just haven't got that licked. DLT could also help with 'hyper-personalisation' where instead of just buying a fund, investors pick and choose the stocks they want within certain wrappers.

BONTE: I do not really understand why this technology is not already mainstream in securities services processes. Is the initial investment too high? Should we start with minor processes to test the technology and create some reassurance?

In addition to cost, there are also concerns about the environmental impact of DLT. The technology could certainly help with processes like KYC and the ability to validate information in real-time. I am surprised that we have not seen a strong push in that area.

FUNDS EUROPE: Legacy systems and the culture of manual processes have always been seen as the main barriers to automation. Are these still the main impediments or are we seeing some new barriers emerge?

WEBBER: Legacy systems are indeed still the barrier to change because the costs of change are high and they're also incredibly functionally rich systems that have built up over an extremely long period of time. It is only when you try to replace them that you realise there are multiple significant levels of functionality behind these systems. This goes back to the concept that a transfer agency is just a shareholder record – well, of course, we know it's not; it's got a lot of other rich activities and things it does. The need for data will create things in a fundamentally different way. You are starting to see new modern architectures built around those legacy platforms, which enable you to move the reporting up to create a single version of the data' truth', which is incredibly important both in terms of automation and the creation of event-driven architectures and keeping that functionally-rich legacy activity.

Over time I think you will then be able to reduce the legacy platform and potentially replace it with the DLT, but it will take time to do that.

BONTE: The challenge is today not so much the fact that we have to change the legacy system; it is around the data – the capacity to structure it and provide the proper quality so then we can send it back to our client or build on top of those data capacities that will help our clients to move forward. It is also not easy to understand and fully master new technology. So there is a technical challenge to make sure that we are getting the right use of that technology.

GLYN: The technology is not the issue. There are still a lot of unanswered questions on how the future landscape is going to operate from a regulatory perspective, and the operating landscape of the future hasn't yet been fully figured out in terms of what role each of the players is going to play. The same goes for each of the participants in the supply chain, and that really needs to be worked through properly, as well as the exact economic business case of this future model.

How is everybody going to get paid? Is it genuinely worth it for firms to do it from an upside perspective instead of just cost-cutting? Because no firm ever shrunk its way to greatness, certainly not in our space, and asset management is very much a scale game.