A new model - why asset management companies must do more with less

Stacey Mullin Outhwaite, Chief Operating Officer, EMEA, BlackRock explains why regulation, social and political change, and low returns mean more fund managers are turning to multi-asset.

Fund Operator Editor POSTED ON 12/26/2019 8:53:34 PM

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Three of the biggest forces shaping fund management are regulation, return and fee pressure, and political and social change.

What are all these forces pushing towards? More for less, and more with less.

Clients want more: better returns, more transparency, more customised solutions that meet their needs, such as ESG, and for clients as distributors, products that meet their regulatory needs as well. And they want this for less: lower fees.

"Three of the biggest forces shaping fund management are regulation, return pressure, and political change"

And asset managers need to deliver more: not only in terms of investment performance against a more difficult beta environment, but also against increased regulation, increased operating complexities, and increased client expectations.

… and employees are demanding more too. Culture that is inclusive, flexible… one with purpose.

Multi-asset solutions: listen, design, manage, review

The shift toward multi-asset solutions exemplifies this well: this is the wave of the future in my opinion.

Wealth managers are more deliberately segmenting their client bases and are requiring asset managers to evolve their offerings.

We also see that open-architecture distributors are reducing the number of providers they work with and are more frequently seeking partnership arrangements.

"The shift toward multi-asset solutions is the wave of the future in my opinion"

The old model was: Portfolio Managers thought about where and how they could deliver return, and asset managers created products based on this, and put them on the shelf, letting the distributor not only determine suitability / what worked for which clients, but also figure out how to explain the strategies.

But now what we’re increasingly seeing is the distributors want bespoke packaged solutions to meet their own distribution needs directly in a custom way.

For that, we need a process for understanding and implementing the specific portfolio construction that the distributor wants. If anyone is going to mix and match products, they need a lot of analytics to see whether the net result meets the client parameters.

And we need to rethink where value comes from: we may not need the same skills in our model.

Streamlining operating models and the use of technology

So, if multi-asset solutions are the way of the future, then we need to change our operating models: how do we meet our clients’ needs, become more modular in our models, and reduce our marginal costs of manufacturing.

A few practical solutions:

  • Leveraging technology and process efficiency in portfolio management.
  • Harnessing the power of digital technology to get closer to end clients and understand their needs better. Being digital means staying closely attuned to how client decision journeys are evolving and how consumer expectations are changing, in the ways previously mentioned.
  • Upskilling our operations teams: teaching them to code their own jobs, and then opening exception processing to certain team members and coding jobs to others
  • Use of Artificial Intelligence (AI) for our technology help desk
  • Hackathons to gather innovative ideas on how to improve processes at BlackRock
  • Doing a broad-ranging Robotic Process Automation (RPA) ‘opportunity review’ from the places you would expect in operations, through to legal and compliance, business management functions, financial reporting, and on and on.

This is part two in a series. To read part three, which looks at why asset management companies need a culture shift – click here.

To read part one, which explains the three biggest forces shaping the asset management industry – click here.

This article is taken from the research report Fund Technology, Data and Operations, Europe 2019. To download the full report click here.


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