How Modern Technology Solutions Uplevel the Finance and Investment Space

March 30, 2023 Lydia Adams

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Technology has created numerous opportunities for the finance and investment space, some of which include automation, access to data, AI, online investing, and more. It has transformed the finance and investment space, improving efficiency while challenging traditional business models. But more on the topic will be shared today by Fraser Armstrong-Watters.

Fraser is the Chief Financial Officer of The Palisades Group, an alternative asset manager in the global residential credit markets that has managed more than twenty-one billion in loans and real estate. His role involves partnering with CEOs to determine their company's corporate and financial goals, objectives, and timelines. Fraser is also on the Advisory Board at The CFO Leadership Council and Texas McCombs School of Business and is a mentor at Techstars.

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Welcome back to CFO Weekly, where we're talking with financial leaders about how to build efficiency in their teams, create time for strategy, and ultimately get results with your host, Megan Meese. Let's jump right in.

Megan - 00:00:18: Today my guest is Fraser Armstrong-Watters. Fraser is Chief Financial Officer at Palisades. He is responsible for leading all corporate and fun level finance and strategic activities. Prior to Palisades, Fraser was Vice President of Finance at Concero. Fraser, thank you very much for joining me on today's episode of CFO Weekly.

Fraser - 00:00:52: Thanks for having me, Megan. I appreciate it being here.

Megan - 00:00:55: Yeah, today we'll be learning about you, of course, but we'll also be discussing technology and investing in the right solutions to enable a business and provide for improved decision-making across an organization. I'm really looking forward to learning from you. So let's get started. First and as always, let's start with you and your story and how you got to where you are today.

Fraser - 00:01:17: Yeah, well, I'll try and keep it brief. I grew up in Sydney, Australia. A fantastic place to grow up, really. A sun-soaked youth with not a care in the world. I started my career in consulting and investment management across the Asia Pacific. After several years of work experience, I picked everything up, work and life, and moved abroad, taking the really traditional Australian ride of passage and moving to London in the UK. Shortly after arriving in London, I recognized my desires and passion were really transitioning from large companies and exploring the world of early-stage companies. That was a valuable development in my career. I pivoted from a focus of a narrow and focused set of responsibilities at large organizations to broad yet pretty intense responsibilities at smaller companies. After several years of building firms in the UK, I had the opportunity and ability to move to the US, which was an early ambition in my life. I landed in Austin, Texas, where I am today, and not long after joined Palisades for some background. Palisades is an alternative asset manager focused on global residential credit markets. Look, when I joined the firm, I really saw three key attributes a strong investment team, an exceptional track record that poised the firm for growth, and complicated challenges in operations and finance that would push me personally and require rebuilding the functions from the ground up to allow the firm to scale. It's been an exciting few years. The firms experienced tremendous growth from 4 billion assets, managed assets under management when I joined, to nearly 10 billion today. But yeah, it's been an exciting ride. Let me pause there. That's a short introduction to myself and the business.

Megan - 00:03:10: So tell me a little bit about Palisades Group. What is it that you guys are investing in or who? Just talk to me a little bit about that.

Fraser- 00:03:22: Yeah, for sure. So Palisades is very focused on residential credit. So that is the whole loan. It can be residential mortgage-backed securities and any real derivative of mortgages and associated credit to that. Our clients are very much focused on the institutional side. So these are endowments, these are pensions, these are foundations, and in rare cases, high net worth and family offices. Therefore, it's a very focused subset of clients that we seek to attend to not so many problems, but their needs and build robust solutions around their required asset allocation.

Megan - 00:04:07: So as you look back on your career or was there a role that prepared you to be a CFO more than another?

Fraser - 00:04:18: Great question. I'd say that there are probably key moments in my career that prepared me more than anything that comes to mind. There is really that transition from large organizations to early-stage companies. I think large companies like refining skill sets and early-stage companies build a dynamic mindset and are willing to take on broad responsibilities. I'd say also just the movement from Australia to Europe and then to the US. Don't get me wrong, a lot of falling on my face and having to pick myself back up. But in reflection, each change represents an inflection point in my life. I'd say the key theme with these revolves around a willingness to take risks. I think about life more like poker than chess, with luck being very prevalent in most pursuits. And I'm willing to take risks because I've mitigated my downside with strong foundations. For example, friends, family, daily habits, and a dedication to my career, I guess. Will I make the right moves in each case? Absolutely not. But I sort of care less about the outcome and more about the process of getting there. And I think all those sort of different experiences from large to early stage companies and those movements to different part of parts of the world have really set me up to perform well in my current role.

Megan - 00:05:48: And yeah, I think life is a lot about taking risks. So how do you balance taking risks and the mindset of a CFO? Because CFOs, we try to mitigate risks.

Fraser - 00:06:05: Great question. I think when I think about risk, it's really how can I control my downside, and sort of then I have set up for really trying to maximize the outcomes that are in front of me. Again, I don't think you can control all outcomes, but by having great structure, great people around you, continued habits, and really a focus towards trying to achieve those outcomes but really take the process as it goes and not worry too much about the scoreboard that can set you up for success. Again, I think the risk in my mind is a willingness to take it, but also seeking to mitigate it where possible.

Megan - 00:06:51: And let's switch gears and talk about technology. So talk to us about how technology has changed the way that the Palasides Group approaches to finance and investment management and what new opportunities it's created.

Fraser - 00:07:06: Great question. Look, as an alternative asset management firm, our investments are incredibly esoteric and operationally complex. An unlimited amount of weeds that try and suck me and the firm in every day. Therefore, to execute and scale our product offering, it's got to be a high degree of efficiency. We're able to do this through a combination of RPAs or robotic process automation, workflow management tool, and sophisticated data management techniques. But really boiling it down. These create opportunities in shifting a focus from purely operational execution to investment-enhancing execution. Trying to streamline time-consuming processes that affect us every day but are very essential. Trying to create informed decision-making with real-time data that becomes available to the firm and the ability to operate in a complex market while maintaining a very lean team.

Megan - 00:08:14: And how do you ensure that technology solutions that you guys are investing in are aligned with the long-term strategic goals of the company and not just short-term fixes?

Fraser - 00:08:26: Yeah, extremely good point. And saying we are focused on I think you can't always solve it. But the way we seek to review any technology initiative is through an evaluation criterion to determine the return on investment and clearly understand the costs and benefits as you'd imagine. This analysis includes things such as understanding the problem and solution and how it aligns with the long-term vision of the firm. Seeking to quantify the history and forecasted impact of the problem, but also the time, cost, and complexity of any solution that comes apparent, qualifying any mitigating factors and the firm's priorities. But then lastly, I'd say engaging expert networks to identify opportunities and threats that just might not be obvious to somewhat of an echo chamber that can occur inside the firm post doing this sort of analysis, appropriate stakeholders would be engaged across the firm to seek to collaborate and align on the value of each initiative and how that aligns to the overall corporate goals to determine its viability.

Megan - 00:09:33: And can you speak to any specific technology solutions that the Palisades group has recently implemented and how those have impacted the organization?

Fraser - 00:09:44: Of course, our business intelligence team would love me to speak to any of their handiworks, a big shout out to them. Across the firm, we've got several proprietary technologies, two examples that come to life that I tend to interact with more. One is called Tract, which tends to streamline the more laborious aspects of collateral management oversight in the whole loan space. As a firm, we manage tens of thousands of loans which as you can imagine with any mortgage, there's a lot of collateral that goes alongside that. So by building a technology platform we can really reduce the manual processes and improve the risk, oversight, and surveillance. Another tech platform that we have is Plateau. Plateau is a modular and distributed modeling platform that tries to centralize the firm's analytics and reduce modeling risk through very enhanced controls. And furthermore, we maintain a proprietary data infrastructure EDW. EDW manages all our data pipelines centralizing the firm's data to a single source of truth and providing users with real-time data feeds.

Megan - 00:10:58: And I imagine working in a startup where everything's quickly changing and technology is quickly changing, how do you ensure that you're picking the right solutions for where it is that you are in your life cycle?

Fraser - 00:11:16: Great question and look, I've definitely experienced not getting it right in each case but I think if you can quantify and qualify a roadmap and seek to align that to the long-term vision of the firm you are at least giving yourself the best chance of success. Does that guarantee the outcome? No. But I think by being able to measure each aspect of that journey as best as possible, you give yourself a chance to pivot where appropriate and also see projects through to completion. So that's the way I think about that.

Megan - 00:11:55: And can you speak to the importance of digital assurance and transparency in the finance industry and how the Palisades group prioritizes these values?

Fraser - 00:12:05: For sure, short comment on that I guess assurance over controls enables the business to seek out those market opportunities and those technology initiatives while being considerate of the downside risk associated with regulatory and compliance risks. We've seen this play out with Silvergate, Silicon Valley, and really the regional banks. Hindsight is 2020 but these moments reemphasize really the priority of risk management from a Palisades perspective. We seek to have the right structures in place. So the way I think about this organizational design, the right committees, and then really getting the right people in the right seats, specifically here I'll call out our GC and Chief Compliance Officer, Craig Fisher, who guides our firm with 20 plus years in legal, regulatory and compliance. And in the fund management space, having the right individuals, and the right structures in place sets you up for success. Again not saying that you can always guarantee, but with the right individuals and structures you can pivot appropriately as required.

Megan - 00:13:20: And I'm just curious as a small organization or I guess smaller and I mean you're in Austin, very tough job market, how is it that you're attracting and retaining the best talent?

Fraser - 00:13:36: Great question. I think firstly I believe in the old sort of phrase of slowly hiring individuals and don't seek to rush that. I think the way that I think about it is making sure that you plan in advance your hiring roadmap and your organizational design to ensure that you don't have to quickly hire in any case because I think if you aren't thoughtful in your hiring you can very quickly make mistakes. There's no secret that we're in the tightest labor market in nearly half a century in the US. Therefore talent is hard to find. But if you have enough time in it, it gives you the ability to really find those right people. I will call out in this case Meredith from the talent and culture side of our firm. We saw the importance, even as a small firm, to have an individual driving that forwards to ensure that we could find the most talented individuals in the market and seek to bring them to the business. But I do think it is an endowment of time and also being thoughtful on the structure in advance to be successful.

Megan - 00:15:05: And how does the Palisades Group ensure that finance is integrated into all areas of the business? And I guess conversely, all areas of the business are integrated into finance.

Fraser - 00:15:19: Yeah, I think, look, I'll talk in a perfect world of it, it's a continually building and continually seeking to create those integrations. But what I'd say is in many cases finance has a quantitative skill set and broad visibility that's not possible or available in other departments of the firm. The visibility of numbers really enables finance to be a key stakeholder in that operating fabric and helps in building OKRs, KPIs, or the relevant operating infrastructure of the firm. As I've sort of highlighted. Look, outcomes can't be controlled and there's an inevitable, almost like a fog of war walking into any new endeavors. But having a quantitative plan which seeks to try and unite each department to what that long-term vision is, it can really drive performance and profitability at the firm.

Megan - 00:16:22: And speaking of outcomes, can you discuss any specific examples of how this integration has led to improved outcomes for either the Palisades Group or its clients?

Fraser - 00:16:33: Yeah, definitely. I think the way that we think of that is we're in the business of really structuring funds and we're constantly considering our strategy as we seek to enhance value for our investors. Moments that come to mind, include bringing new investors into funds, exploring new asset classes, or making strategic sales through finance. Having a robust integration with the investment side of the business, we're heavily integrated into scenario planning and forecasting our funds, the ability to really understand the driving forces of the business, and illuminating optionality to the investment side of the team they can consider and act upon if appropriate. As previously mentioned, I think the outcome isn't the important factor here. It's more the creating optionality and then giving that optionality to different stakeholders across the business and also down to our clients as they may need it, to give them the ability to create those opportunities and those trajectories that align with their goals.

Megan - 00:17:51: And looking at your LinkedIn profile, I've noticed a lot of advisory and mentorships. What is it about these things that are important to you and why do you feel the need to give back?

Fraser - 00:18:07: Yeah, I think look, debt is by no means perfect and I think when I think about those opportunities, a business can be an echo chamber and it is incredibly important to build a network beyond just purely what happens in the day-to-day operations of the business, therefore operating in other channels. For example, I work with the CFO Leadership Committee. I have an active role at McCombs. I also integrate with Techstars here in Austin. Those abilities allow me to understand the movements and what's happening in the industry and the ability to crowdsource solving somewhat complicated problems. So I think with those sorts of communities you get back what you put in and I seek to help others, but I also utilize those areas to understand what's happening in the market and how I can utilize that to help grow the business internally.

Megan- 00:19:16: So important. So on the back of that, what advice would you have for other CFOs or aspiring CFOs? What's one piece of advice you'd offer?

Fraser - 00:19:28: I think my team's ears will be bleeding if they listen to this, as I'm fairly consistent with my approach here. My mantra when I think about career advice is really there are three channels. There's your day-to-day work, continuous education, and your broader network. I think as individuals grow in their careers, it can be very easy. And don't get me wrong, I've been guilty of this too, of just falling into day-to-day work, which can be that echo chamber. I think it's incredibly important to get external opinions and build your network to really, again, crowdsource those answers to somewhat complicated problems. And I don't think it really matters if you're at the start of your career or towards the end of your career if you can continuously push these channels forward and you don't need to do it all at once, but consistency is compounding.

Megan - 00:20:28: It's great advice. So lastly, as a finance leader and an entrepreneur, what keeps you motivated or maybe what's keeping you up at night?

Fraser - 00:20:41: I think with March Madness going on right now, sports has been such an influential part of my life and it parallels my career. So, two thoughts here, I guess. Firstly, I'm very competitive and enjoy the challenge of pushing myself as hard as possible, but with the mindset of process over outcomes and that the scoreboard will take care of itself. Secondly, 15 years into what will hopefully be a 60-plus-year career, I look at that as I'm still in the first quarter and need to maintain a growth mindset in anything I apply myself to, to seek to be successful long term. That's what keeps me motivated on what keeps me up at night side. I think the market is constantly changing and extremely dynamic and you can see that through the growth of OpenAI and ChatGPT. And for me it's just keeping it again, building it through the network through continuous education to ensure that I stay on top of new trends in finance, to seek to continually add value back to the firm.

Megan- 00:21:56: That's great. I love the sports analogies too. March Madness is such a fun time of year.

Fraser - 00:22:02: So much time than looking at broken brackets.

Megan - 00:22:07: Fraser, thank you so much for being my guest today.

Fraser - 00:22:10: Thank you for having me. I appreciate it.

Megan - 00:22:12: Yeah, I really enjoyed speaking with you, and I appreciate you taking the time to be here with us today. And I wish you and the Palisades Group all the best. And to all of our listeners, please tune in next week. And until then, take care.

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In this episode, we discuss:

  • How can CFOs balance risk-taking with risk mitigation?

  • How has technology changed how the Palisades Group approaches finance and investment management?

  • What opportunities has technology created for the finance and investment space?

  • What is the importance of digital assurance and transparency in the finance industry?

Key Takeaways

An Alternative Asset Manager

Quote finance and investment technology alternative asset manager

Palisades is an alternative asset manager focused on global residential credit markets. After Fraser joined, the firm experienced tremendous growth from four billion assets under management to nearly ten billion today. Palisades focuses on residential credit, which can be residential mortgage-backed securities and any derivative of mortgages and associated credit.

“When I joined the firm, I saw three key attributes: a strong investment team, an exceptional track record, which poised the firm for growth, and complicated challenges in operations and finance that would push me personally and require rebuilding the functions from the ground up to allow the firm to scale,” Watters said. - 02:21 - 04:01

Balancing and Managing Risks

Quote Fraser Armstrong-Watters, CFO Palisades Group

The transitions from large to early-stage companies and movements to various parts of the world, according to Fraser, are some of the most impactful experiences he has experienced in his career that prepared him for the CFO role. Fraser believes that life is about taking risks. While taking calculated risks can help a company grow and gain a competitive advantage, you have to efficiently manage those risks and mitigate their potential negative impact on the business.

“Risk, in my mind, is a willingness to take it but also seeking to mitigate it where possible,” Watters said. - 04:01 - 06:44

Leveraging Technology Solutions

Technology solutions have enabled Palisades Group with a high degree of efficiency by streamlining time-consuming processes, creating informed decision-making with real-time data, and operating in a complex market while maintaining a lean team. Some of these solutions include Tract for collateral management oversight and Plateau for modeling risk reduction.

“We seek to review any technology initiative through an evaluation criterion to determine the return on investment and understand the costs and benefits,” Watters said. - 06:44 - 10:50

Enabling Digital Assurance, Technology, and Transparency in the Finance Industry

Quote finance and investment digital assurance and transparency

Implementing effective control assurance measures empowers businesses to pursue market opportunities and technology initiatives, while considering the potential regulatory and compliance risks. If necessary controls were in place and functioning properly, a business can confidently move forward with new ventures, knowing they have minimized potential negative consequences.

Palisades seeks to have the right structures, committees, and people in the right seats. And in the fund management space, having the right individuals and structures in place sets you up for success.

“Assurance over controls enables the business to seek out those market opportunities and those technology initiatives while considering the downside risk associated with regulatory and compliance risks,” Watters said. - 11:48 - 13:12

CFO Wisdom and Bits of Technology Advice for the Finance and Investment Industries

Quote finance and investments space cfo advice

Focus on: your day-to-day work, continuous education, and your broader network. However, as people grow, they prioritize day-to-day work, which can lead to missed opportunities. You have to push all three channels forward; continue educating yourself, and expand your network to achieve career success. You don't need to do it all at once, but consistency is compounding.

“As individuals grow in their careers, it can be very easy to fall into day-to-day work, which can be that echo chamber,” Watters said. - 19:13 - 20:22

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