Moving Forward Fast: Pursuing New Growth

In a recent three-month span, the US market rocketed 2,000 and retracted 1,000. The FED got tight(er). Bitcoin sentiment went from heady to eco-deadly. Net neutrality hit the block. Elon proved that cars could fly. The rate and reach of change are dizzying, and nowhere is this more evident than in the daily work of asset managers.

Asset managers accommodate change, often moving forward fast by overlaying adjustments onto pre-existing processes and technologies to keep pace. Meanwhile, AUM growth masks the consequences of imperfect adaptations, at least until the manager is forced to examine the trade error, poor audit result, or missed opportunity that ensues. Or until, as we’ve seen recently, profitability is squeezed by a market retraction coincident with regulatory tightening.

Overlaying adjustments to accommodate change can cause a disjointed asset management servicing infrastructure, and a weakened capacity to respond to opportunities. And while a complete operational restart may seem an attractive fix, it’s impractical. And disruptive. And may not be necessary. Given the flexibility of technology and the availability of selective outsourcing, managers have the opportunity to fit complimentary capabilities into their existing structure, rather than seek wholesale infrastructure replacement.

In The Wall Street Journal bestseller The ONE Thing, authors Gary Keller and Jay Papasan urge success seekers to ask,

“What’s the ONE THING I can do such that by doing it everything else will be easier or unnecessary?”

This, I think, is a great approach for investment managers to identify ways to eliminate inefficiencies and prepare for future growth opportunities. The asset manager version of the question might be, What’s the one thing I can do such that by doing it everything else will be easier or unnecessary for my…

• new accounts process
• reconciliation practices
• trade settlement effectiveness
• model maintenance and trading flow
• firmwide oversight

These high-volume, high-operational-risk areas are most susceptible to the benefits of selective outsourcing, especially when partnering with an outsourcing provider of proven:

• experience with your current and your future-planned investments, product mix, client base, counterparties, and preferred specialty technologies
• ability to proactively innovate to keep your product set(s) and processes compliant and ahead of the curve
• teamwork in solving for challenges and preparing for new opportunities

I often meet with Chief Operating Officers, Chief Compliance Officers, and other asset management executives whose immediate purpose is to solve a persistent pain such as a process inefficiency, a growing risk factor, or a profitability challenge. And the urgency of their ‘immediate purpose’ is amplified by a market retiring from its nine-year bull run even as the asset management regulatory spotlight brightens. Proven solutions can solve for this. What I’m seeing as our conversations continue is increased optimism, with asset management executives excited to explore beyond current products and processes and imagine entirely new categories of offerings around their investment expertise. These managers, when freed to pursue growth without fixed-cost infrastructure, are leading the way in technology-enabled product development.

More simply stated: for them, it’s getting fun again.