In a recent survey of over 83 asset managers (with USD 10+ billion in AUM), we found that investment managers are shying away from some of the previously popularized growth strategies, namely, mergers and acquisitions and globalization.
Instead, firms are looking from within to improve their growth opportunities.
The survey, Unlocking Growth Through Innovation, found that at the strategic level, firms are putting all their chips on building superior client service and improving their product innovation – clear winners over the other potential focus areas.
One respondent, the Head of IT at a global asset manager with over USD 300 billion AUM, summed things up nicely saying that, “We will be focusing on high quality service and promoting our existing products into these markets. We will also be looking to add new products to our portfolio and the ability to innovate and be agile will be fundamental to our growth aspirations.”
Why is this the case?
In essence, core products such as equities, fixed income and foreign exchange, face such stiff competition that differentiating on this basis has become an arduous task. Combined with pressure on fees and the growing popularity of passive investment strategies, this has caused firms to look at their investment vehicles as well as the depth and quality of services offered to their clients.
The popularity of more esoteric asset classes such as alternatives, OTC derivatives and solutions, such as target date funds, is only going in one direction, up. In this regards, I think product innovation both about asset managers expanding their portfolios, as well as creating brand new product types.
With more focus on product innovation, firms need a system to back it up.
In another survey of our live front office clients last year, we looked at how long it takes to set up a new asset class from scratch - the average response was 2 weeks. Compare this to the months needed for legacy systems and their myriad of interfaces, APIs and so on to achieve the same and it becomes clear that for a product innovation strategy to be successful, you also need to be able to introduce them quickly, and not when the opportunity has passed you by.
Superior customer service
To differentiate yourself from the competition, the customer experience is shaping up to be a key battleground. This requires more transparency for the clients and allowing them to access the status of their portfolios, client reporting, and overview of risk exposure on demand.
So how can firms improve their client service? Automation and access to up-to-date and trustworthy information is the key.
It comes down to your capacity to do more for your clients. One important feature is an on demand client portal powered by an investment book of record (IBOR). The IBOR allows you to view and assess your positions across all asset classes, in a timely fashion. A true IBOR allows you to view past, present and expected future positions and cash combined with investment return and risk analytics. This combined with an automatic process for how to give your clients access to the same information on an on-demand basis.
Being able to onboard new clients quickly is also vital. More than three quarters (77%) of live SimCorp front office clients indicate that they use less than two weeks to onboard new clients and their mandates, with almost half (46%) stating that it takes less than a week. This ensures that your client’s investment aspirations are realized quickly, reducing lost opportunities due to delays in getting clients up and running.
How will your firm be approaching growth in the coming five years? Will you also be focusing on product innovation and superior client service? And are you technologically prepared to execute on this growth strategy?
Lots of important questions. Feel free to continue the conversation with me either by leaving a comment below, or by connecting with me on LinkedIn.
Our latest survey of investment managers worldwide shows product and service innovation are considered key to unlocking long-term growth and that forward-thinking firms have already begun taking the necessary steps to compete for the future.