Out-dated systems may cut revenue by 50% at buy-side firms: TABB
Trade delays caused by technology that is not fit for purpose could be costing buy-side firms as much as 50% of revenues, according to a TABB Group study. Inadequate technology means front-office staff at many buy-side firms are spending up to an hour a day addressing technological errors. The resulting trade delays could account for opportunity costs of anywhere up to 50%.

Front office staff are spending too much time solving technological errors on a day-to-day basis, which could be costing firms up to 50% of revenues, according to a recent study by TABB Group.

The consultancy found 38% of asset managers have front office staff spending between 30 minutes and an hour a day rectifying technological errors, which it says is an “expensive proposition”.

TABB Group explained: “Trade delays caused by inadequate technology could account for opportunity costs of anywhere up to 50% of revenue, with a full 20% estimating their opportunity costs at 10% or more.”

The survey also asked firms, who were all asset managers based outside of North America, about employment of technology and multiple vendors.

It found 30% maintain legacy platforms, despite them contributing to trade delays and errors.

“Firms are maintaining out-dated systems or platforms that have been in place for an extended period,” TABB Group said.

It added: “Until the outmoded system causes a major financial error it is possible that the architecture will stay in place well past its sell-by date and even the point where the vendor supports it.”

The study concluded that firms must upgrade systems if they are to ever achieve alpha, compliance and ultimately, growth.