These are challenging times for asset managers. Disruption is a pervasive force. Driven by technology innovation, empowered customers, volatile economics and advancing regulation, industry change is moving faster than ever.
Keeping pace with disruption
We’re seeing our asset manager clients respond to these developments by innovating and reinvigorating their products and processes. It’s easy to see why. Firms that fail to keep pace with fast-evolving front-office initiatives and client expectations will soon be left behind.
The priority? Constantly reviewing operations. Or more specifically, the operating model. Leaders should think strategically about how technology – both internally and externally developed applications – will evolve, as well as how their people and skills strategies will need to change to harness these innovations.
Investing for the future…where, how and why?
To answer these questions, we teamed up with the Investment Company Institute (ICI) to carry out an in-depth study into ICI members’ investment operations. Our research, Reinventing Operations in Asset Management, included interviews with operations leaders at 33 asset managers, accounting for around US$15 trillion of assets under management.
The findings provide a snapshot of an industry in transition. They cover the full spectrum of issues facing operation leaders as they evolve from old to new ways of operating – from improving growth and efficiency to harnessing emerging technologies, and from managing legacy technology to optimizing talent.
In every area, we found that the leading firms apply innovative thinking to overcome industry-wide challenges. In doing so, they’re creating a model that others may choose to follow.
Targeting growth, efficiency and technology innovation
In our Capital Markets Vision 2022, we suggested asset managers incorporate a combination of four growth levers and four efficiency levers into their transformation programs. Our study with ICI confirms that many firms are now well on their way to deploying these levers through a considered approach.
Tapping into revenues from new products and distribution channels is seen as the surest pathway to growth. But some firms are also looking to monetize capabilities – like proprietary software – that go beyond their product and asset management competencies. Where efficiency is concerned, respondents point to operating model changes as their top lever (53%) – with 64% completing a major operating model change in the past three years.
Source: Accenture/ICI operations study
New revenues and operating efficiency are both critical. But to bridge the two, the firms in our study stress that they also need supporting technology and innovation competency. Fifty-five percent of them have a formal initiative in place to evaluate the potential of new technologies, like fintech solutions. This reflects the ongoing democratization of innovation enabled by the cloud and application programming interfaces, as well as the more open stance that’s being adopted toward the fintech community.
Three key operational challenges revealed
While tools are available to help operations support firms’ strategic goals, there’s still work to be done. Some 42% of operations executives believe their operations and technology are not currently configured to adequately execute their firm’s overall strategy.
Asked to list their top operational challenges, respondents highlighted three most frequently:
- Supporting complex securities and transactions
- Managing data in ways that ensure quality, accessibility and trust
- Addressing the limits of legacy technology across the investment lifecycle
Efforts are being made to address these challenges:
- Just over 50% of firms have launched initiatives to support new products and new geographies
- Fifty-five percent are running programs to enhance governance and data quality
- Over 40% are running a back or middle office system consolidation or conversion initiative
Calls for disruption across the investment lifecycle…
As well as taking these steps, operations leaders are leading calls for disruption across much of the investment lifecycle. Our Capital Markets Vision 2022 highlighted how industry utilities could play a role in disrupting some key processes – and our operations study respondents agree. Top candidates for disruption include data management (66%), collateral management (22%) and clearing and settlement (18%).
Disrupting these processes will require active cooperation across the ecosystem – asset managers, service providers, exchanges and more – together with a “capacity for innovation” in operations, including the ability to combine new and legacy technology solutions.
Leveraging new technologies to reshape middle and back office operations…
Firms are reviewing multiple new solutions to reduce risk, increase speed to market and create operating leverage. Leaders are already experimenting with technologies like artificial intelligence, distributed ledger, robotic process automation and blockchain.
…while transforming talent in operations
The final – crucial – piece of the operational reinvention jigsaw is people. Our study confirms that asset managers know they need to transform talent in operations. And as shown by the increased demand for business-focused technology talent, this is already well underway. Zeroing in on specific skills, 75% of operations leaders identify investment operations knowledge and problem-solving as the top skills they’re seeking today. Five years out, 65% believe data science and technology development qualifications will be most in demand.
New strategies require new operations
Our study shows asset managers across the industry are investing to unlock their capacity to innovate and grow. New operational capabilities will underpin their ability to thrive in a disrupted future, and there’s a drive to implement the best technology, upgrade operating models and develop top talent.
Firms are working hard to lay down this foundation for future growth and we found that operations leaders have a high degree of responsibility for these initiatives. Now that new strategies have been mapped out, the next big challenge is execution, with the goal of blending profitability and organizational flexibility.
To learn more, read: Reinventing Operations in Asset Management.