By David Mackaway, General Manager, Challenger, Australia.
When Challenger set out to implement an ambitious growth strategy, we knew that a fully aligned operational IT solution would play a key role in driving this expansion and fulfil its goals. What was envisaged was a solution that not only would meet existing business requirements but also support future growth opportunities.
For Challenger, the adoption of one core integrated investment management solution that provides essential efficiencies and control has empowered the company to achieve outstanding growth rates. We are able to administer the company’s entire range of assets through a single IT solution that creates the optimal operational environment for successful and sustainable growth.
Learn why Challenger wanted an end-to-end solution in order to house front, middle, and back office all in one system as well as cater to a broad range of securities.
Targeting business growth of 20% p.a. or more
In 2004, we chose to proceed with a growth strategy that was based on expanding both the company’s annuity business and fund management business. This strategy was to be achieved organically (i.e. profiting from the growth of the superannuation/pension system in Australia) and with the help of strategic acquisitions. Targeted was a business growth rate of 20% per annum or more over a period of five to eight years.
Distinct strategies were chosen for each of the two main business areas. For each business, growth areas were identified in terms of retaining and growing business with existing clients, attracting new clients and/or entering new markets.
Within the life business, where Challenger is the largest provider of annuity income streams to retirees in Australia, the growth strategy was to:
- grow the business through acquisition with a number of smaller annuity providers likely to be subscale and hence open to acquisition
- continue to expand the diverse range of investments;
- maintain momentum in organic sales growth through increased distribution team size and more sophisticated and targeted sales and marketing.
Within the fund management business, on the other hand, Challenger’s strategy was to re-engineer the business in its entirety. Moving away from a model where investment professionals were direct employees, we adopted a model whereby investment teams were established as independent ‘boutique’ investment houses. Key investment professionals would become owners of the business in partnership with Challenger via its wealth management business Fidante Partners and Challenger would provide administrative and distribution support to the businesses.
IT solution supports growth strategy
Challenger’s strategic growth objectives entailed a number of operational requirements that highlighted the importance of ensuring sufficient and fully aligned IT operations support. To precisely outline the target operation model (TOM), we performed a detailed mapping of key operational needs against system capabilities. This process served as a cornerstone in developing the fully aligned IT platform strategy that would be supporting Challenger’s business growth strategy.
In terms of system capabilities, Challenger mapped out the following TOM requirements:
- Ability to service a complex business model investing in a diverse range of securities across markets/jurisdictions and then structure these into varying product types
- Rapid adaptability to change
- Scalability to cope with an aggressive and non-linear growth (due to acquisitions)
- Scalability to remain cost-efficient despite growth
- Well-controlled and effectively monitored and measured processing
- Ability to handle complex regulatory requirements and client demands related to a diverse product set
One solution spurs competitive advantages
Determined to meet ambitious growth targets, and with the necessary technology and operational requirements mapped out, the IT strategy was in place to go out and find the supporting platform solution that would be fundamental to our success. With the growth we were undertaking in the organization and our move into servicing the boutique environment, we were finding that the range of securities and services that were being asked of us from an operations perspective was broadening, and our current legacy systems were struggling to meet those needs.
To provide optimal operational support, we were looking for a fully integrated end-to-end investment management solution with a proven ability to be highly flexible in accounting for and administering assets for different businesses. Having one core asset management system would provide multiple efficiencies and control to a company like Challenger with a highly diverse range of asset classes and client needs. With this in mind, we chose in 2004 to effectively transition the operation of the entire business and all its assets to a single in-house investment management system in the form of SimCorp Dimension.