Sara Benwell: What are some of the top drivers of change for asset managers?

Simba Mamboininga: ESG is certainly impacting every industry and most managers have somewhat been caught on the back foot as their integration of ESG factors has largely been reactive to client demand and regulatory requirements, rather than strategic.

Simultaneously, pressure on fees, new regulations and the desire to deliver further value to investors continues to force firms to rethink their business models. This is leading to more M&A deals, changes in strategic relationships and the integration of new cloud-based technologies.

"ESG is certainly impacting every industry"

The business benefits vary depending on the initiative however this could result in firms gaining scale, creating complementary product sets, accessing new markets/offering new products, and achieving a more efficient business model.

Sara: Why is the fund management industry struggling to transform and what are some of the key barriers preventing firms from innovating?

Simba: When your business strategy is not clear, it leads to a haphazard approach in implementation as each team have their own interpretation of what they believe is right.

This shows the importance of a clear strategy, the need to communicate it effectively, and ensuring buy-in from your staff.

The integration of ESG into firms’ operations and products is a good example of where firms, scrambling for flows from sustainable products, have launched new ESG type products without suitable governance frameworks to support.

"When your business strategy is not clear, it leads to a haphazard approach in implementation"

This led to green washing accusations and concerns from industry commentators and clients alike. Moreover, this is compounded by the fact that ESG data is still in its infancy, despite the continued improvement in coverage.

All transformation activity requires firms to perform a robust due diligence process. This requires input from highly skilled practitioners with a diverse range of expertise, and comprehension of how the firm fits into the current myriad of activities within the asset management industry.

Such expertise is required to efficiently analyse key information that may determine a firm’s decision to go ahead with the transformation, and subsequent planning.

The industry is continuously challenged to perform appropriate due diligence as genuine expertise is in limited supply. Inadequate due diligence processes often lead to ever increasing budgets as costs rocket and projects are delivered late.

"The industry is continuously challenged to perform appropriate due diligence"

Ineffective collaboration between teams and organisations also continues to de-rail transformation programmes. Delivery is hampered by workstreams and organisations adopting siloed approaches and being too protective.

Ultimately the entire organisation pays the price for such poor practices. Firms need to be cognisant of this and should consider implementing mechanisms that encourage effective coordination across all vertical and lateral touchpoints, and this should be reflected in all planning.

Working in partnership from the very beginning and with all stakeholders is key, as is the inclusion of outgoing relationships.

The biggest enabler for value added change is technology. Firms that are capable of efficiently reducing their legacy platforms and replacing them with new Fintech solutions will benefit.

"Ineffective collaboration between teams and organisations also continues to de-rail transformation programmes."

Unfortunately, this isn’t the case, with many firms still operating on old and inefficient infrastructure.

We have seen this as a key issue in our recent study into product governance. Poor data and poor system architectural design practices have made it difficult to swiftly move away from these costly legacy systems.

This is hindering firms in providing innovative products, considering new ways of client interaction, implementing new product governance solutions and enhancing business model efficiency.

Enterprise solutions that truly make data work for firms are key for firms’ success. Managers need to address their data and software challenges! The asset management industry could be seen to be lagging behind their retail banking counterparts in this regard.

Sara: How can fund operators address these barriers?

Simba: Solutions to addressing barriers that are preventing some firms from achieving their potential are strategic in nature. An honest assessment of a firm’s business and its position in the investment industry is required.

Firms may consider:

• Performing an honest appraisal of their product offering and reputation within the market, with sufficient market insight into client expectations and demographics, and clear priorities
• Reviewing their business models to understand their data usage and how this could be revamped to achieve true enterprise solutions
• Understanding their technology requirements to enhance the value of their propositions

Sara: How important is culture in creating an organisation that is able to embrace transformation?

Simba: An organisation’s culture will permeate through all aspects of what the organisation does.

This might include how staff collaborate regardless of their location, a consideration even more important as a result of Covid, the staff’s attitude to risk and how diligently they execute their duties, the trust awarded to staff and the accountability they take in managing that trust, as well as the way communications are perceived within the organisation.

These cultural aspects play an integral role in a firm’s ability to transform swiftly.

"An organisation’s culture massively influences its ability to embrace and execute change"

When transforming a business, there are many complexities and numerous moving parts. The ability of teams to collaborate effectively and deliver robust plans is key.

There is a reliance on teams to act diligently to ensure planning is robust and credible. Very often, decisions making is required at short notice, the ability to delegate decision making and trust your teams to make the right decisions is important.

Clearly, a balance will need to be struck, however ensuring an appropriate level of governance that delivers transparent and clear communications is fundamental for success.

So, you can see how an organisation’s culture massively influences its ability to embrace and execute change. Every business is built on people and paying attention to cultural aspects has long term benefits.

 

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