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vestr, a fintech startup focusing on software for actively managed products, was created as a response to a fundamental gap in the industry. Software solutions for actively managed products present a considerable gap compared to their static counterparts.
In this interview Rico Blaser answers questions regarding the journey behind vestr, its unique positioning in the fintech market, and how it enhances the offerings of financial institutions dealing with actively managed products. Additionally, we explore vestr's commitment to innovation, client-centricity, and talent retention.
Rico Blaser: Actively managed products are fundamentally different from static products in that the underlying instruments can be dynamically adjusted throughout the life-cycle of the product. In addition, these adjustments are typically performed by an external portfolio manager, who leverages a large universe of underlying instruments across multiple asset classes.
In contrast, static products typically get created directly by the trading desk and feature a nonlinear payout based on the future behavior of a predefined set of underlying instruments. These underlying instruments usually do not change throughout the life-cycle of static products.
While working for several large financial institutions it became clear to me that most banks had very sophisticated infrastructure in place for handling static structured products but not for actively managed products. More specifically, the systems were optimized for dealing with complicated payouts, managing volatility surfaces and correlation structures and for hedging various forms of market-, credit- and counterparty risk.
However, they did not provide external customers a real-time view of the products and did not provide them with a modern interface to monitor and adjust their products or to create their own customized or branded reports. The systems also handled corporate actions and other life-cycle events relatively poorly for actively managed products. Even today quite a few institutions still manage multi-billion dollar actively managed products in spreadsheets. This results in unnecessary and expensive manual labor, a poor customer experience, not to mention the significant operational risks.
Having traded these instruments professionally, my two co-founders and I were very aware of the challenges in this space. But the real impetus for starting vestr was when we realized that it didn’t make sense for every issuer of actively managed products to spend millions to build and maintain their own infrastructure in this area. Instead, we wanted to build a feature-rich and flexible technology solution that could be customized to the needs of each institution and their clients in a white-labeled fashion. We called it the engine behind active management.
Rico Blaser: I believe we stand out both from a product perspective but also from a domain expertise perspective.
vestr offers the most advanced and feature rich white-label, end-to-end software solution tailored to the specific needs of financial institutions dealing with actively managed products. We have put great care and attention to make sure that our platform is easy to integrate, easy to use, highly customizable and scalable and we build many new features in collaboration with our customers.
On top of this, our team is composed of multiple financial industry veterans and experts with in-depth knowledge of the financial industry. Collectively, our team possesses an extensive financial services background spanning well over a century. During our professional career, we have successfully executed trades totaling billions of USD. This expertise enables us to understand the intricacies of actively managed products and design a platform that specifically caters to the challenges and requirements of this domain.
And finally, at vestr we never compete with our clients.
It may seem like a trivial statement but many financial technology platforms are closely aligned with an entity that actively competes with the users of the platform. This leads to a competitive or informational disadvantage for external users and fosters distrust.
In contrast, vestr is an independent technology pure-play, meaning we do not engage in regulated financial activities and therefore do not compete with platform users. Instead, we always have the best interest of our customers in mind. In fact, our incentives are perfectly aligned: if our customers are successful then we are successful.
vestr's white-label Software-as-a-Service (SaaS) solution significantly enhances the offerings of financial institutions dealing with actively managed products in several key ways.
First and foremost, our white-label solution provides a customizable and brandable platform. This means that financial institutions can tailor the platform to match their unique branding, design preferences, and client expectations.
Secondly, the vestr platform offers a comprehensive suite of tools and features designed specifically for actively managed products. It streamlines and automates various aspects of product management. Financial institutions can access actionable insights and make informed decisions swiftly, ultimately improving the efficiency and effectiveness of their product offerings.
Lastly our solution is simple to integrate and use. Customers can be up and running in a matter of days, compared to years if they would build something similar internally. Once active on the platform they can set up a product in minutes.
We're pleased to say that various financial institutions, regardless of their stage of development or area of operation, have found value in our solution.
Certain major, important banks have chosen to entirely replace their internal systems with our solution.
On the completely opposite end, we have small players who are just starting their ventures in the area of actively managed products and have used our solution to scale from practically zero to hundreds of millions of dollars in AuM.
I would also like to mention that some crypto providers are also using our solution.
Creating a platform of this magnitude demands significant human resources, time, and substantial investment. Financial institutions may find it more efficient to allocate these resources elsewhere since software development isn't their primary expertise. Our journey to reach our current stage took over 7 years and required investments of over 10 million USD. That's precisely why many of our customers initially considered developing a similar solution in-house but ultimately opted for our platform due to the considerable challenges and resources involved.
We engage in proactive participation, not passive observation, closely monitoring financial market dynamics, regulatory shifts, and shifts in investor preferences. This active engagement empowers us to anticipate trends and tailor our platform's development to proactively meet the evolving market needs.
We actively engage our clients in thoughtful discussions and consultations regarding the best practices surrounding Actively Managed Certificates. By actively participating in discussions and forums, we contribute thought leadership and innovative ideas to the field of AMCs. (download our Actively Managed Certificates white-paper)
Feedback from our clients and end-users is invaluable. We regularly gather and analyze feedback to identify areas for improvement and innovation. This iterative development process ensures that our platform evolves in direct response to user needs and preferences.
The regulatory framework surrounding actively managed investment products is continuously evolving and presents subtle variations across jurisdictions and legal structures. Our role is to aid clients in fine-tuning their technology configurations to align seamlessly with their specific legal setups. We ensure a precise match between the technological architecture and the regulatory requirements, facilitating a compliant and efficient operational environment for our clients.
For example, a managed account setup requires different modules from a structured products setup or a special purpose vehicle, which in turn requires different functions than a crypto bank or a traditional fund. Each setup calls for a tailored technological approach, precisely catering to its unique operational requirements and compliance mandates.
There is a clear trend towards increased transparency for all parties involved and particularly for the benefit of the end customer. This encompasses transparent fee structures, optimal execution, comprehensive risk disclosures, and continuous reporting. We endorse this vision and have strategically incorporated features that align seamlessly with these evolving requirements.
At the same time, the solution is designed from the ground up to support auditors and regulators when needed. This is achieved by keeping a full audit trail of every action performed on the platform.
Furthermore, our clients utilize the vestr platform to conduct suitability assessments and establish automatic enforcement of investment product constraints, allowing for a tailored and compliant investment environment.
At vestr we engage in a consultative and collaborative process with each financial institution across the entire engagement funnel.
In the early stages this involves in-depth discussions and analysis to understand their distinct goals, existing systems, and any unique features they may require.
After a client decides to work with us, our team assists with the integration.
After integration we actively seek feedback from financial institutions using our platform. This valuable input informs iterative updates and enhancements, ensuring that the platform remains aligned with evolving preferences and requirements.
And last, but not least vestr provides ongoing support and training to ensure that financial institutions can effectively utilize the platform.
I have a quantitative background in computer science, mathematics and machine learning. For this reason, I have always had a keen interest in collecting quantifiable empirical insights and applying state-of-the art algorithms to benefit clients and improve operational efficiency.
In my first job, I leveraged an academic research project to build tools for Wall Street firms to efficiently internalize and aggregate order flow across multiple liquidity pools. Then, for nearly two decades, I held front-office roles on the buy- and sell-side of US and European financial services firms. During that time, I worked as a trader and was responsible for billions of dollars in trading volume, both in simple flow products as well as in highly exotic tailored structured products.
Throughout this time it became clear to me that solving challenging quantitative problems was best done outside of large financial companies. This is because established players tend to be reluctant to drive forward internal technological innovation and spend most of their budgets on maintaining and supporting existing systems. In addition, it is difficult to justify large long-term commitments to such projects because it is simply not the core focus of a large financial institution.
Our approach at vestr is to build, maintain and support technology around active investment management for the long-term and in a client-centric fashion. We have a laser sharp focus and aim to become the market standard in this area. Our clients benefit greatly from our white-labeled solution and are able to achieve a better offering for their clients much faster and with significantly lower up-front costs. Internal resources can be applied to the daily challenges, rather than being tied up in long-term development efforts.
In terms of our company, my approach is to hire the best people and let them do their job. I don’t believe in micro management and I like to hire experts who are better at their specific job than anyone who already works here. In addition, we have a very friendly culture, share information very openly and take education seriously. It is important to me that everyone has a chance to grow.
We anticipate a continued shift toward customized and data-driven investment strategies, increased integration of technology and artificial intelligence, growing demand for ESG (Environmental, Social, and Governance) integration, and an ongoing focus on cost efficiency and transparency.
All of this is underpinned by the ongoing digital transformation within the banking industry. Banks are increasingly embracing digital platforms and technologies and are partnering with fintech companies more and more.
At vestr we are well-prepared to support banks in this transformation. Our commitment to innovation and collaboration positions us as a reliable partner for banks and other financial institutions embarking on this digital transformation journey. As actively managed products embrace the future, vestr is primed to be an architect of this transformation, enabling our clients to thrive and deliver exceptional value in this evolving landscape.
At vestr, our core principles are centered around innovation, client-centricity and collaboration. Our clients are at the heart of everything we do. Understanding and meeting their needs and expectations is our primary focus. We actively listen to their feedback, prioritize their success, and tailor our solutions to deliver the best possible outcomes for them. Many of our products’ features have been built following a request from one of our clients.
Our employees are our most valuable resource and we do our best to be a great place to work.
For us this means fostering a collaborative and inclusive culture where ideas are shared and all voices are heard. This comes hand in hand with empowering employees by giving them autonomy and decision-making authority in their respective roles. We believe in entrusting our team with responsibilities, which not only fosters their growth but also instills a sense of ownership and accountability.
By doing this we can offer internal growth opportunities to our employees and we celebrate individual and team achievements regularly, appreciating the hard work and dedication of our employees.
By implementing these strategies, vestr aims to not only attract top talent but also cultivate an environment where employees feel motivated, engaged, and committed to contributing their best to the growth and success of the company.
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