#Blockchain end to financial services and banking #STP and #BPO Accounting?

In the same way that digital downloads has crippled the mass market of vinyl and CD’s does Blockchain means the end of financial services and banking straight through processing and the accountancy service model?

By reviewing the cost reduction culture of recent years it is understandable why the banking industry has become ripe for Lean Straight Through Processing (STP) and Business Process Outsourcing (BPO) Accountancy. But like other change and transformation activities embedding irrelevant processes in technologies, STP and then BPO accountancy is missing the essential point, they are no longer required if Blockchain is deployed.

instead of building Blockchain in the image of Banks, Banks should be rebuilt in the image of Blockchain, dramatically reducing process complexity and overheads

A Blockchain model for STP and BPO Accountancy

There are several factors about Blockchain that make it eminently more suitable for the highly regulated environment of STP and Accounting than software and middle and back office staff (regardless of how their provision is acquired). And of course you can dramatically reduce your expensive accounting staff costs as reconciliations, account status etc is automated as part of the chain, even regulatory reporting can be automated and regulators can have direct access to the blockchain through a rights and roles model only seeing at the right level what the banks and financial institutions want them to see.

Blockchain is distributed

A Blockchain (assets or liquidity) can be distributed to other Banks, Clients, Original Owners, Regulators, Tax Offices at an organisational level it can also be distributed to divisions and functions within organisations.

The nature of Smart Contracts can be defined for each organisation through the use of a Content Object Model around any given Item, with information facets in much the same way as WCMS systems are setup. Transaction data is transparent based on a Roles and Rights Model within an organisation and externally, once set up for each User Type reporting is automatic and no collation (from other sources or currency factors as these are embedded) or interpretation is required, this totally removes the accountancy functions.

Blockchain is not editable

Because blockchain is not editable

an editable blockchain would be called a Database and is essentially not a blockchain

all charges and transaction errors must be added to the chain and will be visible according to the chains Rights and Roles Model. Therefore nothing is lost and the chain will be compliant to regulation through its architecture rather than by addition of more processes.

Blockchain is smart (blockchain future-proofs itself)

Because Blockchain enables complex content object models, Smart Contracts allow the addition of new information. Unlike a database that would require a rewrite for additional information

when a Smart Contract has additional information added it updates the current block and evolves the chain

Blockchain will have a global impact

For years technology has impacted low skilled worker often removing humans altogether, the use of artificial intelligence supports the removal of strategy and management, the IoT removal of logistics and retail while Blockchain will initially impact banking and insurance but it also holds the potential to manage all information in a traceable and secure way.

Any country reliant on the financial services sector for jobs and taxation will need to look for an alternative source of income given the dramatic decrease in staff required to run a bank, trading or insurance company in the near future.

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#SmartLiving or as we might live with #artificial #intelligence and an open #IoT in a #new #reality

I tend to think of myself as a futurist, I immediately see the possibilities of technologies as part of a much larger ecosystem than the one it is intended for.

I look for ways to test and assess “How we might Live” with the technology and how it will adapt our lives, our cultures and move humanity onwards to greater things.

Digital Living

In our modern societies we have relieved ourselves of the burdens of the industrial age and are in the process of doing the same to the digital age. We had digitized the same old processes, making them easier to do, involving less time so we could use that time on other things, but we had not thought to remove them. That is the next stage in human and machine evolution, removing pointless interactions and processes.

“we used to wait until the washing machine broke down, to arrange a service engineer, then we took out a service contract so they would call us, with our IoT machine, it calls the engineer, or shop and they just charge our account when we get the service or comestibles we need to do our washing, but we still need to check we have not been over charged”

We Keep Moving Forward

Modern convince has only changed the stress points in our lives, from analog, to digital and from servant, to master and onward to accountant. However the wider ecosystem changes that are coming, may mean that washing clothes becomes a meaningless process as well. We need to be aware when we build dead end processes and be prepared to throw them away with their subsystems when they become redundant.

Smart Living

There is much talk about digital ecosystems and benefits of IoT and artificial intelligence, but little about the living experience it will create, the social and political upheavals it will cause except in the extreme destruction of humanity and machines as overlords aspect.

However our societies are balanced on several key behaviours that can be changed or in fact removed in a Smart Living scenario.

Smart Living – Wealth

Establishing a means to gain wealth is a clear goal in human existence, regardless if that wealth is the ability to purchase or to be healthy, wealth is essential. Our current society enables wealth acquisition through speculation, work, connections or product distribution, new types of wealth are also on the horizon (which I will cover in another post).

The wide distribution of blockchain technologies afford the ability to remove several of key aspects of speculation. Speculation works through special knowledge, insights of availability, location, size and a choice to sell or buy. However with blockchain only the choice to sell or buy is an unknown factor, everything else is visible. Not only will blockchain reduce and remove hidden wealth it could destroy its value, as moving and reselling by taking advantage of another persons lack of knowledge will no longer be possible.

Bitcoin with Blockchain Smart Wealth Transparency rather than Secrecy
Bitcoin with Blockchain, Smart Wealth, Transparency rather than Secrecy

You might say that the new dynamic of wealth will be Transparency rather than Secrecy. In fact accessing a transparent wealth system from non attributable assets will not be possible as they will be consider tainted or fake, hence they lose their value.

Smart Living – Work

In a smart world do we work? Ideas are still needed but committees about ideas are not, if like the idea we can test buy, by printing it at home. Since it’s creativity and inspiration to be creative that we crave knowledge and creations become the central focus of work, teamwork does not require physical co-location only a communication method. With Smart working, textures, smells, colours. sounds, people can all be delivered virtually. This would mean no more offices, centralised property in a city would no longer be a focus and would cease to have value.

People with ideas that other want is Smart Living Wealth
People with ideas that other want is Smart Living Wealth

The nature of world will revert to a more feudal barter system where our services are available as a group (forum or company) or as in individual.

Smart Living – Transport

The big question is where are we going and why? Will humans still want to visit the world or will they have the world in their home?

Travel to work flying armchair?
Travel to work flying armchair

If work is not the priority is mass transportation a need. If shops are virtual again the question is where are we going and why?

Smart Living – Home

We are looking at a revolution in the the focus on human lives and the home is the major battle ground for Smart Living. As the workplace was for Digital Living a way to create better control and work during previous down times, the home will become a place to enjoy, between working moments.

Sub-cultures

And what happens to everyone else who can’t transition between Digital Living into Smart Living, because of the loss of freedoms, due to not having the skills to function in Smart Living or just not being invited?

The will be and has always been other cultures co-existing the problem even with Digital Living is the marketing makes it desirable to people who can’t by skill or education or work have it. Their addition to society is not respected or valued. The odd thing about Smart Living is that it makes people with manual skills the same value as creative people, because they do things rather than move things around.

You might say that “Smart Living is the end of Management” in all its structures as devices become self managed and humans no longer need it.

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#Strategic and #lean #thinking in private investment and asset portfolio participants part 2

There are several types of on boarding that relate to both business and investors structure and size, their specific purpose for investing and their local regulatory constraints.

The Main Participants

I will be focusing on four main participants in this post financial advisers (FA) and investors (I), either or both of these may be constituted by companies, funds or individuals and para planners (PP), local office administrators (external or internal) (AD), company back office administrators (AD). Other participants are traders, local regulation, international treaties, company regulation, regulatory reporting, trustees, product managers and the security services.

Financial Adviser

The role of the financial adviser is shaped by the organisation they work for both by its nature and its size. As a general rule, the smaller the firm, the more the adviser is likely to be involved in the process of client management. They will be managing their calendar, running segmentation reports, and getting to know the systems their firm uses. An adviser in a larger firm may spend more time on face-to-face client interaction and will delegate other tasks to administrators and Para-planners. They will be an avid consumer of research, but might have summaries prepared by para-planners. The adviser’s use of online tools and services will vary, but this is an attitudinal variable and is less correlated to the size of firm. They may view online tools as essential to helping perform well on behalf of their clients, in which case they will be a demanding and sometimes critical user. Alternatively they may be wary of disintermediation, seeing online servicing as a threat and something that could devalue the relationships they have carefully cultivated with their clients.

Financial Advisor High Level Processes by Karl Smith
Financial Advisor High Level Processes by Karl Smith

Para-planner

Para-planners are usually younger than advisers, and probably use online tools more frequently during the average working day. They will often carry out tasks for example, creating illustrations or portfolio models on the instructions of a financial adviser or as a way to show capability for the next step in their career. Although the Para-planner often carries out similar tasks to the administrator, their context of use differs. They may be an aspiring adviser herself, and their tasks are usually part of a larger, open-ended activity, such as research, where they help shape the approach. This means that although Para-planners often make use of process-heavy features, they are less process-driven than administrators. For Para-planners, attitudes to technology may be less behaviour-defining than for advisers: not at a sufficiently advanced career stage to make decisions on behalf of the firm, and will make use of the technologies available. Finally, they are likely to be heavily involved in the planning and aftermath of client review meetings, even if they do not attend them. They will play an essential role in meeting preparation and in executing any follow-up actions agreed with the client. In this sense they are a key resource for the adviser, and will therefore value any tools that help them work more rapidly and more effectively.

Para Planner High Level Processes by Karl Smith
Para Planner High Level Processes by Karl Smith

Investor

Of all the participants the investor is most subject to variation. The main reason for this is that, while other participants are shaped to a certain extent by their job roles and the responsibilities, constraints and priorities these involve, investors are strongly defined by attitudinal factors which vary from individual to individual. One key factor that defines how an investor interacts with the product company is their degree of financial mediation, with discretionary investors on one end of the spectrum and self-directed investors on the other. The differences between these extremes are so significant that, these will need to be defined as distinct participants later. Other factors that will strongly shape investor behaviour include risk tolerance, investment horizon, degree of financial engagement & sophistication, the amount of time devoted to financial matters, and the way online information is located and used (this last factor is important even if an investor is entirely discretionary). It is also important to remember that the investor participants as well as the product company’s business goals relating to them are heavily affected by the stage of their relationship with the product company and with their adviser.

Investor High Level Processes by Karl Smith
Investor High Level Processes by Karl Smith

Administrator

The roles carried out by administrators can vary significantly based on size of firm and the age or career ambitions of the administrator. Some administrators see the job as a transitional stage before attending university and receiving a financial qualification others might be called “career administrators” and might have been working in this role for many years. Some administrators especially career administrators may have become experts in the systems they use on a daily basis. In smaller and mid-sized firms, these administrators will probably be the company’s leading expert on these systems, and there are real-life examples of administrators who have created manuals for asset management systems which are used to train new staff. These experts can sometimes be most resistant to changes, even when the changes represent a tangible improvement, as they have invested so much time becoming familiar with the old system. Resistance to change is less pronounced among administrators who are younger, less experienced, or who do not intend to stay in the role in the longer term. Administrators are not key decision-makers in an organisation, but they are key users, if a system frustrates them and reduces their efficiency, their firm will suffer.

 

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#Strategic and #lean #thinking in private investment and asset portfolio management, part 1

This article is intended to review the current process problems that many investment and wealth management companies are attempting to solve. For many years these businesses have been wreathed in secrecy regarding how they do, what they do, often this has not been by choice but merely a by product of business processes that have not fundamentally changed in fifty years and in environments where technology is not considered as an enabler.

The creation and management of investments have evolved into a complex time consuming and inefficient practice due to many complexities not only within financial advisory companies and people but also management services, financial product offerings and regulatory structures and the various platforms they use. However by mapping the basic interactions between these groups and investors it is possible to not only determine quick wins but also radical time and cost saving leading to increased transactions with existing clients deeper market penetration and capture with new clients.

There are five basic interactions I will be mapping as part of this paper;

  • On boarding (including Fact Find, AML etc.)
  • Financial Review
  • Advised Financial Modelling / Portfolio Construction
  • Self Service Financial Modelling / Portfolio Construction (including Self Service Trading)
  • Regulatory Reporting

There is a lot to pull together to do this, it is very insightful if you have not been involved in financial services or you are involved but have not kicked off your financial services transformation project yet.

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