Capital markets insights

Nineteen. That’s approximately the number of paper forms an institutional investor interested in subscribing to a private placement must fill out. From certifying beneficial ownership to confirmations that they have sufficient anti-money laundering guidelines, even getting past the first step can be a major hurdle.

Investment advisors today face one key challenge – creating value in ways that can resist the increasing commoditization of wealth management. Decades ago, executing simple stock market trades were expensive affairs requiring calls placed to a broker (who often also provided stock recommendations). Now, they are commoditized affairs where the main differentiator is price.

Are financial services companies fully harnessing the power of intelligent workflows in the private capital markets? Or are they being left behind?

Today, financial institutions must contend with the accelerated rise of the three ‘Cs’ – competition, compliance, and costs.

Software is eating the world. These were the words investor Marc Andreessen – cofounder of prominent venture capital firm Andreesen Horowitz – wrote back in 2011. In the ten years since, much of his proclamation has come true. Netflix disrupted cable, Airbnb disrupted hotels, Uber disrupted taxis. And fintech is disrupting wealth management.

The pandemic caused widespread disruptions to global supply chains, leading to shortages and supply shocks for many goods. Although not a physical good per se, we see a similar thing happening in the private placements market.

Financial institutions today face a battle on two fronts. The first front is rising competition – especially from the fast-growing fintech industry which continually strives to encroach on incumbents’ territory. Nimble and digital, these upstarts are unencumbered by legacy systems and processes, giving them a powerful advantage in their quest for market share. 

Investments in private markets are seeing traction like never before - with that, brokers are growing their top line and breaking all-time deal volume records. However, this success has created stressors for Brokerage back-office teams, especially in the compliance function.

The technological advancements we’ve been experiencing for the past few decades have had a profound impact on various industries. Entertainment, Retailers, Health Care, and many other industries have all adopted a tech-centered approach to their business models.