Asset managers are going through unprecedented change. Relationships with servicing partners are evolving. We go behind the scenes to speak to asset servicing experts and find out what’s really important for asset managers, what’s changing, and who’s involved in transforming their business, together.
In Episode 2, we get a view from down under. The Australian superannuation industry has seen huge growth in recent years. How are asset managers managing this transformation, and how can they adapt their operating models? Annie speaks to Sundar Narayanasamy, Head of Change & Transformation for Australia, and Mustapha Ouafik, Head of Client Delivery, Australia
Annie Blouin: Hello, I’m Annie Blouin, the Global Head of Relationship Manager and Client Services at BNP Paribas’ Securities Services.
Welcome to this episode of our podcast series Beyond the Trade. In this series, we go behind the scenes to speak with our asset servicing experts and uncover what’s truly important to asset managers.
In this episode, I’m delighted to be joined by two of our experts from Australia to discuss the topic of defining new operating models. Asset managers worldwide are undergoing significant transformation in response to economic condition, cost pressures, changing investor behavior, new technology, and much, much more. And this is particularly evident in Australia, where BNP Paribas collaborates with leading superannuation funds and institutional investors to support them through these changes.
So, joining me today are Mustapha Ouafik. Mustapha is Head Of Client Delivery for Australia and New Zealand. And Sundar Narayanasamy, Head of Change and Transformation for Australia.
So starting with you, Mustapha, first of all, thank you for joining me today. Could you share some insights into the transformations that funds are experiencing in Australia, and how the role of the custodian has evolved to support these changes?
Mustapha Ouafik: Thank you, Annie. Great to be with you here today.
So let me help you to set the scene about Australia & New Zealand. According to APRA, which is the Australian Prudential Regulation Authority, the Australian superannuation industry manages approximately 4.2 trillion USD in assets at the end of 2024[1], which is the fifth largest holder of fund assets globally.
So this is primarily driven by the superannuation guarantee, which mandates employee contribution to retirement. So comparing to the size of the population, this is a huge amount of assets that are being invested every year. So, to support this growth, our business in Australia & New Zealand is undergoing significant growth, having won a number of transformative client deals in recent times.
It reveals that custodians and asset servicers therefore adapt and grow to match the increasing needs and volumes of the superannuation and wider investment industry in Australia & New Zealand. So to respond to your question, I will mention three things. The first one is being a change champion for our clients.
Number two, leveraging data and technology. And number three, it’s about becoming an integrated business partner.
What I mean about champion of our client is being able to ensure end-to-end execution, deliver their objective with efficiency and manage operational risk. And take the ownership of the operation, the transformation, and the service.
So number two, like I said, is more strategic enabler. New technology can help us to achieve our objective. Why? Because investment strategies have become more complex, financial products, and, the scale of the transition has become very large. So there is continuous pressure on both parties. So we need to find new technology to be able to reduce the risk.
Number three, fully embedded governance allows us to understand, anticipate and drive client transformation. Success is not only about execution, it’s about co-creating the transformation. So we want to be aligned with our client about the business priorities, while we are minimising the risk.
Annie: Thank you, Mustafa.
So, turning to you, Sunder. Practically, how does this work? How can we ensure seamless integration with clients’ system, especially in our world of complex, multi-vendor ecosystems?
Sundar Narayanasamy: Thank you, Annie, for a great question.
Ultimately, as Head of Change and Transformation, my role is to help our clients achieve their strategic goals while balancing the product and services that we offer within BNP Paribas’ Securities Services Australia. The beginning of the journey always starts with the operating model. What we do as a focus is to exhaustively analyze, synthesize and map the operating model in its entirety.
This means really establishing the data sets, the flows, the timings, the reports, the feeds and the dependencies. Not an easy task, especially when you’re dealing with operating models that are very old. Typically, what happens in transitions – when a client decides to move custodians, they have operating models that can be decades old, in some cases, and we have to unpick it all and really understand the services, processes, etc. that we’re taking on
As we do that, we also then look at the technology that comes with that. Not only the technology we at BNP Paribas offer to our clients, but also the systems and the services and partners that our clients use. Often we find that the larger the clients, the more there can be duplicate systems that are offering very similar processes. So, really, to interlink the different aspects and getting that upstream and downstream flow correct is essential.
What can happen with transitions is that not only is the client moving custodians, at the same time, they may be changing the investment managers as well. So again, interlinking what everyone does, and how they do it, is critical.
And then the challenge then is once you understand it all, how do you integrate it all. Integration is essential when you’ve got bespoke systems. Speaking different languages, giving different formats and so on and so forth.
So when we start looking at that, we say, okay, how do we bring it all together in a seamless fashion? Ultimately, our role as a custodian, why clients choose us is to 1) reduce cost, bring efficiencies and ultimately bring more advanced, technological solutions.
When we’ve got all those different systems, we really want to look at interoperability and ultimately we do that – ideally we would use APIs or application programing interfaces. The challenge with that is that we’ve got security considerations. So cybersecurity is a big thing.
Data privacy is also a big challenge, as we pick up data from, especially from retail investors or large institutional investors, especially on registry data or transfer agency. How we protect that data as well. So within Australia, what we’ve chosen to do is really look at Alteryx for ETL or extract, transform, load, and Power BI.
What do we do? Within Alteryx we’ve built a series of, modules or libraries or function, where we’re able to use Alteryx to extract, transform and load data for a number of different service providers, custodians, clients, etc. and we can really provide very quick reconciliation by looking at various asset classes and, doing the reconciliations. And then we use Power BI for that visual reporting for our internal teams and external clients to be able to reconcile, verify and validate that data.
So in essence, by bringing the operating model and reviewing that first, then understanding the systems set, we finally then bring the data in using our own tools and then produce, visual reporting to make the whole thing a seamless and transparent migration.
Annie: Very, very interesting, Sundar. Thank you for this.
It really looks like a comprehensive approach to integration and change management.
If I understood properly, by understanding the operating model, ensuring connectivity while leveraging tools like you mentioned, Alteryx and Power BI, you can achieve seamless integration and effective change management. And that brings us nicely to the point about technology. So, again, to you Sundar, how are custodians leveraging emerging technologies like AI?
Sundar: Another great question, Annie.
AI is certainly a mega-trend. I think practically everyone talks about it. Practically everyone’s involved. As a result, we already have a lot of AI tools and agents out there. For example, in our client platform NeoLink, we have NOA – NextGen Online Assistant[2] for query management.
AI is a big advantage in that it offers cost reduction, risk management, pricing, speed, scalability, and so on and so forth. And so ultimately, at BNP Paribas we’ve been engaged in this for quite a while and a very exciting journey was last year, when we partnered with Mistral, as an AI partner[3].
Custodians generally operate under a heavily regulated industry. for good reason. across the board. And as a result, the temptation with AI is to go very, very fast. And, the speed to market – everybody wants to be the first to get out there.
However, we do have to balance the time to market against the regulatory backdrop. And we need to consider navigating the risk and complying with regulations. And of course, it gets even more challenging when you consider cross-border regulations as there are a lot of clients in Australia that are growing, and putting a lot more presence in overseas markets, especially in Europe.
What we’ve done at BNP Paribas is to really consider governance being essential to risk management, cybersecurity and data privacy considerations. These are absolutely paramount. No matter the benefit of AI, being a regulated entity, we really do have to consider those factors. We really need to harmonise between enabling these emerging technologies, with respect to speed market, against this backdrop of ever-changing and growing regulations.
Mustapha mentioned earlier APRA. We also have ASIC, the Australian Securities and Investments Commission. We also have the ATO, the Australian Tax office. So we have lots of bodies that apply regulations that we really do have to take into account as we, look at the AI theme.
I’ll just finish off by saying that within BNP Paribas, it’s not just AI. We’ve actually been on a long journey already doing automation, especially with RPA, or robotic process automation.
We’ve deployed this in our operational teams, in a number of different areas, and we’ve been very, very successful in deploying these, what they call bots in production today that actually enable STP or straight-through-processing in a number of different operational functions. With that, we’ve been able to get our experienced people to really focus on the more value-add work, enabling BNP Paribas to grow its servicing services products and really giving our clients a more experienced value chain offering.
Annie: Thanks, Sundar. It will be very interesting to see how these use cases evolve in the future and how we can all manage this balance between speed and risk on one hand and compliance on the other hand. So a final note from you then, Mustapha.
More widely, what trends do you see shaping the future relationship between Australian institutional investors and their partners?
Mustapha: Number one volume of assets and growth.
As mentioned earlier, the Australian asset management industry has been growing rapidly and we can see the funds under management reaching new heights. As an example, today we are 4.2 trillion USD. Compared to the US and the UK. Australia pension market has been growing impressively, driven by the superannuation system. Australia’s strong performance is notable given its a smaller population right: 27 million.[4]
So we do expect the rate of growth to slow, maybe down a bit, in this current context.
The number two trend I will quote about increasing consolidation. Another key trend that we are seeing in Australia: many of the smaller fund managers are merging or being acquired by larger firms driven by the need to scale up in a competitive market.
This consolidation allows fund managers to reduce the cost, improve efficiency and improve the risk framework. And of course, deliver a wider range of products to meet investor demand.
So as far as I can see, one flip side of this could be potentially to lead to less innovation and diversity in investment strategy as there are few players on the market. It’s important that asset managers remain agile, I think, and offer diverse product to remain relevant and competitive to the client.
And obviously, last but not least, is operational risk. Obviously, operational risk has increased and becoming a major concern for Australian asset managers. On this point, asset managers need to increasingly invest in a robust risk management framework to safeguard their operations and maintain investor trust.
These inevitable trends will influence how superannuation funds are managing their operations, their transformation and the execution. And custodians like us, and our client, should seek to have integrated business partners. And the reality is in the market, we can see that more assets are in the market, more diversification, more complexity.
More complexity, which means that the fund needs a stable partner who can be part of the team and understand the need of their strategy. With the volume of asset, it’s not just about, only running it – they e will not be able to run everything on their on. They will need to rely on a partner to be able to support the growth.
Success is not just about executing change. It’s about designing with our client, together from the start, a truly integrated governance model. This will allow us to understand our client challenge as if they were their own.
Anticipate risk before they emerge, and ensure that every transformation is delivered within time and budget. And I will conclude to say that clients will increasingly need us to think like we are their COO. We are working for them, and we are delivering the transformation for them and operations for them. And I see myself not only as a COO of BNP Paribas, but a COO of all of our clients, focusing on their priority and on their deliverable.
Annie: Mustapha and Sundar, thank you so much for sharing your insights. I believe our European viewers will find much that resonates with them, and I’m really looking forward to seeing how these partnershipsevolve in the future.
Mustapha & Sundar: Thank you, Annie.
Annie: This has been a Beyond the Trade podcast, and do stay tuned for more episodes soon. Thank you very much.
[1] APRA, https://www.apra.gov.au/news-and-publications/apra-releases-superannuation-statistics-for-december-2024
[2] BNP Paribas launches new-generation AI-powered virtual assistant in its Securities Services business – Securities Services
[3] BNP Paribas and Mistral AI sign a partnership agreement covering all Mistral AI models – BNP Paribas
[4] Population clock and pyramid | Australian Bureau of Statistics