No one likes having to reinvent the wheel, but sometimes there is no other choice. This was Barbara Gottardi’s thinking when she first joined Vanguard as its chief information officer (CIO) for Europe in September 2020. Soon into the role, it became apparent to her that the asset manager needed to establish a Europe-centric approach to developing its data stack, to meet local regulations and service EU client needs. Today much of Vanguard’s three main business operations—across its trading platforms, its global information and communications (ICT) unit, and investor services—are run from its US offices.

While the first two pillars—trading tech and ICT—are mature from an innovation standpoint, Gottardi says, there is still some work to be done to diversify the buy side’s investment products (e.g., fund of fund portfolios) to better service EU clients and assign more authority to the European offices.

“Originally, when I arrived, the EU base was a spillover from the US, but there was no clear kind of responsibility and accountability on product structure and what we needed to do, and that’s what we’re working toward,” she says.

Gottardi’s vision includes implementing a new data strategy to enable EU teams to better control and leverage internal data in the future. She says much of the asset manager’s internal data goes unused and her objective is to establish new ways of analyzing it more effectively to better service clients, inform financial advisors, and derive insights for the trading desk.

“With data, there’s a lot of wastage,” Gottardi adds. “There are also things that I think we could do better—and I’m sure this is across the industry—such as standardizing how we interrogate data.”

Long-term, Gottardi aims to implement more sophisticated data lineage and governance controls across the data it houses in Europe. As with many data transformations underway inside banks today, the goals is for any user—for example, a data scientist—to be able to pull information from one of its data lakes, understand where it is coming from, how it can be used, analyze it, and use it to inform different parts of the business, including fund management, advisory services, and client relationships.

Gottardi joined the asset manager after working at HSBC for over 16 years, the last three of which were as CIO on the retail side of the bank. She says that while a bank might have much more data than a buy-side firm, it doesn’t mean they are equipped to use it.

“From my experience in a bank, even if you’ve got a lot of data, it’s so fragmented that you actually cannot put it together,” she says. “So even if you have been a customer of the bank for 20 years, you might think they should have everything they need about you [as a customer], but no, because one thing could be on one database, and something else on another, and they do not join the dots.”

Another challenge tied to investigating internal data, she has found, is human bias.

She says that because each data scientist uses different methods to source and analyze data, they can arrive at different answers to the same data query. In turn, variable data outputs can prove problematic for building tech or data products, such as recommendation engines used by financial advisors, pricing securities for indices, and client-facing solutions. 

“I think it would be a real worry for the client in terms of how we run queries—like if we gave misleading information. So, I think there is a lot more that we can standardize across the industry,” Gottardi says.

Like in most major implementations, the data strategy was met with some pushback or hesitancy. In this case, Gottardi says that when she initially proposed an EU approach, the concern among some senior executives was that the region wanted to “go rogue” or overly deviate from the way the US ran its systems or where they managed the data. However, she adds that leveraging the US’s work and expertise can enable Europe to move at a faster pace. 

One driver that has helped to move the needle of the EU approach is regulation. EU regulators have rolled out some of the strictest regulations on the planet when it comes to data residency, and under the EU General Data Protection Regulation (GDPR), all personal data should be stored and processed in EU datacenters, unless permitted by the owner of that data to do otherwise. Following Brexit, the UK also adopted its own version domestically.

“There are certain things that have to be done in a relevant region—for example, there will be data in Germany that cannot be [processed in] the UK because of Brexit—so instead of thinking of regulation as a hindrance, you could actually use it as an opportunity and use Europe as the backup of the data that you have,” Gottardi says.

Because the EU and the UK follow such rigorous data protection and data residency rules, Gottardi says Vanguard’s European base could operate as a key location to house a master copy or backup version of the asset manager’s global data. The broader adoption of the cloud and the ability to house data in any suited location, whether that is Europe or across the globe, has also become a significant contributing factor in pushing this EU approach.

However, achieving an EU data governance structure is still a long way away, and collaboration with the business is key, says Gottardi. But for Vanguard’s European base, fintech could become a big part of how it arrives at that destination.

Answering the age-old question

“Should we buy or build?”

Gottardi chuckled when she was first asked this question soon after joining Vanguard and thought, “If only the answer was that black and white.” Nine months into the role as CIO, she has taken steps to better answer it—in turn, making fintech a key part of Vanguard Europe’s tech and data strategy.

One way she is doing this is by sitting on the advisory board of TISAtech, a newly launched digital marketplace for connecting financial institutions with vendors. The TISAtech platform was rolled out by the industry membership group, the Investing and Savings Alliance, which is made up of more than 200 organizations including BlackRock, Deutsche Bank, and Morningstar, and aimed at resolving Mifid II reporting inefficiencies. 

The TISAtech platform is designed to help banks and asset managers access a pool of fintechs that have been pre-screened using an algorithm. The algo evaluates the vendors against the British Institution Standards, a range of technical standards that cover areas such as a tech firm’s risk profile, efficiency, financial stability, and business continuity. 

“Having a tool that can do the first screening, where it compares like for like, means [that the onboarding environment] doesn’t become an old boys club,” Gottardi says. By this, she means that the TISAtech tool should help to allocate contracts to worthy candidates based on their product, performance, and stability, rather than through affiliation or “frat bro” relationships.

Sourcing worthy fintech—for projects like that of Vanguard EU data strategy—can demand a significant amount of time, money, and energy, requiring sign-off from multiple parts of the business, including senior management, finance, IT, legal, and compliance. This can become more problematic if the institution outsources departments, such as procurement or legal, and loses touch of the time and money taken to implement the project. Gottardi says that while a business might think an implementation might cost X, in reality, once you’ve looked at its entirety from a tech perspective, the testing, the fixes, and integration costs can easily add up to many more zeros.  

“You end up with false expectations where the business expected something to be delivered in three months for x dollars and it ends up becoming nine months and a multiple of x25 times x dollars,” she says.

Given the heavily regulated nature of the industry, there is a high barrier to entry for fintech to win contracts with a bank or asset manager. Gottardi says that if successful, TISAtech could facilitate the typically arduous onboarding process and help fintech to better engage with potential clients.

“If the platform is used properly, and has the support of the regulator, it can help fintechs have a chance to work with bigger organizations and avoid the need to run crazy onboarding processes where we’re asking vendors to commit to things that could make them bankrupt on day two, instead of thinking of ways to partner with them to evolve the product and help them grow,” she says.

As part of Vanguard’s EU strategy, Gottardi will look at using the TISAtech platform to probe vendors that could aggregate data across multiple disparate sources and help derive better insights from client information. She aims to also use the platform as a resource to learn from vendors and peers about new technologies and ways to innovate. And that level of collaboration, no doubt, will require some firms to put aside their competitive differences, she adds, and make a point of putting the client first. 

Over the next several months, TISAtech advisory board will be tasked with defining 10 problem statements about leading industry issues they are facing. Once that is completed, fintechs will be invited to showcase how their solutions can help resolve those problems. The board, whose members are still being appointed, will be made up of experts across 11 industry verticals, including the buy side, sell side, Big Tech, wealth management, consultancy, service providers, trade bodies, and more. The platform hosts over 3,600 fintechs and was built by the Disruption House, a provider of vendor assessment solutions.