Vulnerable margins.

That’s the outlook for asset managers, unless they can get a grip on their costs, according to the latest annual Morgan Stanley and Oliver Wyman report[1].

Despite stellar AUM growth in 2017, asset management revenues only grew one percentage point faster than costs. But with lower market returns and ongoing fee pressure likely through 2020, the report predicts the industry will be forced to tackle its stubborn cost structures.

Data and technology should be an immediate focus, says the report, which notes that data management still represents 10%-20% of firms’ cost bases.

 

Quality data has never been so important

And here’s the rub.

Investment managers’ success is increasingly dependent on high quality data, whether it’s to service clients better, spot new market opportunities, add to investment performance, strengthen risk management or comply with evolving regulatory responsibilities.

Yet collecting, collating and processing available data, and leveraging intelligent business analytics tools to deliver the sorts of powerful insights firms now need to compete and grow, can be time consuming, operationally challenging, and expensive, especially with the assortment of legacy data stores and siloed systems organisations typically have.

As the data demands and challenges intensify, many asset managers will have increasing difficulty in achieving and sustaining the level of coverage and infrastructure sophistication required.

 

Putting data front and centre

The solution?

Automation, standardization, centralization and exception-based reconciliation. These are the keystones to effective data management.

Using an integrated, data-centric technology infrastructure will allow data to be more easily managed, controlled, accessed and disseminated. This helps reduce:

• Direct costs

Aggregating data from multiple sources through a centralised hub means firms no longer need to maintain numerous counterparty and data vendor interface connections. They can identify unnecessary or duplicated data feeds across the enterprise (a common and expensive issue), and adopt a “receive once and publish many” approach.

• Indirect costs

Freeing employees from repetitive, time consuming data collection and administration tasks:

• Minimises the costs and risks associated with manual processes, and the resulting errors and inefficiencies. Working on an exception basis only.
• Facilitates faster and smoother consolidated client, regulatory and management reporting.
• Enables staff to devote more attention to supporting clients and focusing on higher value activities, further boosting firms’ service capabilities and business scalability.

 

Essential capabilities

With data so integral to asset and wealth managers’ success, having the right mix of capabilities is vital. Essential features of a fit for purpose data infrastructure include:

• Extensive counterparty/data provider connectivity and relationship management to ensure smooth and efficient access to the comprehensive array of data flows needed to conduct your business.
• Open architecture to simplify data provider connectivity, and make it faster and easier to add new providers as required.
• Highly automated data management and workflows to minimise manual intervention, and maximise processing efficiency, speed and scalability.
• Normalisation and enrichment capabilities to facilitate automation and produce functional data outputs.
• Monitoring services to check the status of your data, and identify and resolve any exceptions.
• A skilled and knowledgeable team able to provide expert support to smooth the data extraction, normalisation, enrichment and delivery processes.

 

What’s more, effective data management must be rooted in every part of your processes, from the initial customer contact onwards.

Key components on that journey include an interactive client portal that can help automate client onboarding and reporting distribution, centralised CRM systems that track and manage all client interactions, a flexible data hub to act as a single data store, and an integrated portfolio management solution that can disseminate real time portfolio information.

An efficient, enterprise wide data strategy will require a big step forward for many investment managers considering the return on investment and the sheer transparency value.

As the Morgan Stanley/Oliver Wyman report points out: “We estimate automation and outsourcing can deliver ~30% industry savings, with a maturing vendor landscape and potential greenfield solutions putting more activities on the table.”

 

[1] Wholesale Banks and Asset Managers – Winning Under Pressure, Morgan Stanley and Oliver Wyman, http://www.oliverwyman.com/our-expertise/insights/2018/mar/wholesale-banks-asset-management-analysis-2018.html