• Regulatory updates from the NAIC, EIOPA, SEC, and other regulators relevant to investment accounting.
  • Best practices and other considerations relating to investment data operations, based on Clearwater’s extensive experience and client base.
  • News and other updates on the latest innovations in the financial technology sector.
  • Information about, and dispatches from, the most important industry events for institutional investors across the globe.
  • All about Clearwater: what is our company up to, and how can you best engage with our community of users.
6 MIN READ
INVESTMENT OPERATIONS    SAAS

SaaS: The Right Tech for Right Now

SaaS: The Right Tech for Right Now

INVESTMENT OPERATIONSSAAS

We at Clearwater have been hearing from our clients: Will service continue? Can we operate effectively? Will the website and the data behind it work now that people are working from home?

The answer to each of these questions is, “yes.” And the reason, put simply, is SaaS. 

The kind of technology you use matters. The way our software is built — from the very first line of code — is providing significant benefits to our clients during this time of change and uncertainty.

Here are some of the big questions business and operations leaders are asking right now, and what SaaS means for their answers:

  1. Will my systems continue to work?
  2. Can my systems scale on-demand and under stress?
  3. What is my key-person risk?
  4. Does the quality of my data exceed industry standards?
  5. What about my budget?

1. Will my systems continue to work?

Clearwater is cloud-based. That means that our users access the system via a web browser, regardless of whether they are at their desks, at home, or anywhere else (or if they’re using a desktop machine, laptop, or mobile device). 

We do not install our software at our clients’ facilities, nor do we build single instances and store them ourselves. Our robust infrastructure delivers the computing power and storage for all our users. And that super-robust infrastructure is replicated, safeguarded, and duplicated multiple times, to ensure its safety and viability.

A key benefit at this particular moment is that our operations and R&D people do not need to be on-site to operate, maintain, and improve the Clearwater system. Just like our customers, Clearwater personnel access our foundational technology remotely, whether they’re in the office or not. In fact, our system up-time during all of March was 100%.

2. Can my systems scale on-demand and under stress?

The behaviors of the financial markets and their participants have been predictably unpredictable. The word volatile is having a moment. 

Not all systems are built to withstand a change in the status quo.

Here is an example from Clearwater. This image shows the trade volumes captured on our system through most of Q1 2020. Prior to March, the average trade volume fluctuated between 47,000 and 75,000 trades per day, with only four days above 100,000 (and none above 115,000). In March, we’ve seen the 30-day average steadily climb to over 100,000 trades per day and had a single day that topped 200,000.

Daily Trade Count

Our robust SaaS solution was built to scale and handle this massive uptick. Most on-premises systems cannot. Our ability to scale has everything to do with the features I mentioned above: cloud-based technology, automation, and a broad base of support and development expertise.

3. What is my key-person risk? 

A frightening feature of the COVID-19 health crisis is that such a high percentage of us will, at some point, become sick. The vast majority, thankfully, recover completely, but with a minimum of at-home rest and required quarantine. Quite simply, anyone on our teams may need to take a few weeks off in the near future.

If you felt you had key-person risk before COVID-19, you are surely feeling it acutely now. 

How does SaaS mitigate key-person risk? Through automation.

Automation, fundamental to how Clearwater works, solves key-person risk. For example: roughly 95% of Clearwater’s daily reconciliation checks are completed automatically, with zero human intervention. That impressive accomplishment is a testament to the strength of our technology; and it means data is available sooner and at a higher level of repeatability, transparency, and auditability than if it were processed manually.

Our automation is not developed in a vacuum. Clearwater’s product owners and software developers are true industry-players: given that we have 1,200+ customers we have multiple experts in every area imaginable reducing key-person risk.

4. Does the quality of my data exceed industry standards?

Multi-tenancy is the keystone to data quality. It means that we’re a shared system: any improvement we make is to the benefit of all users.

Beyond our own data scrubbing efforts, the real power comes from our thousands of Clearwater clients, many that invest in the very same instruments, reviewing the data in their portfolios on the Clearwater platform each day. Inconsistencies are quickly communicated and corrected. Each correction fortifies our common security master data set: the work is shared, to the benefit of all.

With multi-tenancy, the quality and accuracy of our data is unmatched. (In fact, it is not uncommon for Clearwater to notify custodians and other data providers regarding errors in their own data.)

To illustrate: Clearwater reports on more than $4 trillion in investments, daily. To do so, we have built and maintain more than 2,200 automated data connections to various providers. Roughly 50% of our company is dedicated to software development, and more than 26% of our revenue, year-over-year, is reinvested in R&D —we value innovation and continuous improvement. Scalability, data accuracy, and operational excellence is woven into the fabric of who we are.

Returning to the topic of reconciliation: paired with our 95% rate of automatic recon checks, multi-tenancy ensures that the security master data used to model your investments is accurate, verified, and trustworthy. And (it must be noted) that work continues uninterrupted when individuals need to miss work.

Not only does Clearwater’s technology model produce industry-best data — we also have a vantage point to develop, and enable, operational best practices.

On a daily basis, we work very closely with the most sophisticated insurers, corporations, investment managers, and other institutional investors in the world. With over 1,200 clients, we have a bird’s-eye view of how these organizations are operating, and how others can improve accordingly.

This is especially true in two areas. Asset class treatment, at a time when many are looking to complex or non-traditional investments to both diversify and bolster performance; and regulatory reporting, where bodies and directives like IFRS, NAIC, SEC, Solvency II, and others evolve quickly, with significant impacts to investment accounting. We are at the forefront, interpreting and impacting how accounting and reporting changes are implemented.

5. What about my budget?

Another feature of our SaaS model is our approach to the contract and billing agreements we have with clients. Not only are contracts month-to-month; we also charge clients on each billing cycle based on the value of assets they currently have on the system. Put simply, this means that when your investment portfolio grows (the overall trend among our clientele), your bill adjusts upward. However, if you need to liquidate a portion of your investments, or if overall performance dips due to unforeseen market events, your monthly bill will reduce accordingly. 

This model ensures that our interests are in lock-step with our clients’. It should also provide assurance to those concerned about the short-term outlook of their investments: we only charge for the assets you currently hold.

While several companies are trying to ensure that their infrastructure holds up, many Clearwater clients are playing offense: acquiring new customers or companies, investing in new pools of assets, adjusting their portfolio strategies. Our solution — truly, our partnership — enables them to do so now, without adding to their operational burden. We help them scale, and we open new investment opportunities.

From all of us at Clearwater, I wish you well during these challenging times. And if we can be of service in any way, please don’t hesitate to reach out.

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