Author: Jacobi – jacobistrategies.com
Like any business, COVID exposed weaknesses and opportunities in the way that investment managers operate, serve their clients and adapt to global shifts. Many have since re-assessed their priorities and, for many, digital initiatives have accelerated. But within the digital arms race, there are four initiatives that investment managers should prioritise over the next decade.
1. Front-to-client integration matters most
The past decade saw many managers improve efficiency by integrating their back, middle and front-office investment processes. Yet there is a risk that these multi-year, resource-intense projects are predicated on a product set that does not fit client needs of tomorrow. Whether that is ESG, low-cost, passive, private asset or customised solutions, most important is a close feedback loop between clients and the investment team.
Faced with a flurry of client requests through COVID, extracting relevant and timely information on portfolios from investment colleagues still proved difficult in many firms. The problem is that systems that sit in investment divisions were never designed with client engagement in mind. Instead, the next ten years will see a “lifting of the lid” of front office tools, data and insights. Much greater than any client reporting initiative, focus will be on enabling clients to have a rounded understanding of their portfolio, on their terms.
2. Bigger than AI… no-code platforms are the future
While AI and data science grab all the headlines, less talked about is where does that all land? In many groups, there is a perception that once a model is run, it then becomes a data visualisation and communication challenge. Emphasis is then on deciding on business intelligence software to visualise and present data across a firm. Yet investment groups face a deeper challenge – they need the ability to flexibly connect multiple workflows, processes and streams of information.
In the same way that the spreadsheet revolutionised investment groups in the 90s, we are on the cusp of a change. The future lies in no- or low-code platforms that allow users to rapidly build models or tools and have them easily shared and used across the organisation. Think highly collaborative “super-spreadsheets” for the investment manager of tomorrow. Important will be no-code platforms specifically designed for investment groups that enable professionals to connect and interact with unique tools, data, charts and information.
3. Balancing scale and client customisation at different levels
In many investment managers, the portfolio solutions team is often the busiest… and most difficult to scale. Afterall, they face a dichotomy – they must have sufficient flexibility in processes to meet different client needs, but also have sufficient process consistency to ensure scale, control and governance. The solution is a modular approach where the component parts of their processes are each neatly defined, apply common inputs and outputs, and connect with one another. It also requires a well considered range of building block “model portfolios” that can be adapted and combined for different client needs.
But not every client wants a managed portfolio solution. “Customisation” also extends to the way in which managers position their products and services. Investment groups still have work to do to identify the optimal product and portfolio change that should be positioned with a client. Importantly, the very same tools and inputs used to customise a portfolio should be used to contextualise the product set and to support clients in making their own decisions.
4. Unravelling the information spaghetti – connectivity trumps all else
Many investment firms still face a clutter of disconnected systems and data sources. And many realise that what is best for a team is not always best for the organisation. Indeed, systems that are difficult to connect simply leave other teams and systems plugging gaps. Part of this problem stems from firms being held hostage to “closed-architecture” incumbent technologies – i.e. they lack technological means to connect information (e.g. limited or poor APIs) or have commercial terms that make connecting excessively penal.
The future should see “connectivity” of technologies and information prioritised over all else. In the same way that Jeff Bezos forced his Amazon team in 2002 to adopt a common framework to serve up information and connect it with all other parts of the organisation, important will be technology architects that set the rules for how an investment group’s information should flow. This extends beyond an API strategy and into the commercial terms that a firm applies when working with partners. Any system, data or partner without appropriate means (and terms) to connect and integrate should be de-prioritised. Otherwise, duplication will creep in, costs will rise and innovation will be stifled.
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