On June 20, RIMES hosted its third Client Conference in Boston. In the second session of the event, Ross Tremblay, Senior Manager in Accenture’s Asset Management Practice, presented on how asset managers can build effective data management strategies. What follows is a summary of the main points presented to the audience.
For his presentation, Ross drew on two research reports: Accenture’s Capital Markets Vision 2022, and a survey of asset managers Accenture carried out in partnership with the Investment Company Institute.
The macro view
The key challenge facing asset managers today is how to achieve scale. Usually, the ability to increase its profit margin becomes easier as a company grows. However, in the asset management industry this mechanism has broken down, largely because the cost of the products and services firms provide has fallen, while their operations costs have increased. Today, the most value-added elements of an asset manager’s operations – sales & distribution and investment management – make up just half the total costs accrued by firms.
Asset managers surveyed by Accenture agree that new revenue opportunities and operational model changes are key to growth, but only about half (58%) believe they have the operational capabilities to support their firms in these areas.
The good news is that there are plenty of opportunities for firms to pivot to new technologies and approaches to secure growth and competitive differentiation. Ross identified three main ways in which asset managers can look to secure growth:
- New products and markets: Identify and leverage new sources of revenue. For example, asset managers can exploit the potential of proprietary software as a key part of new revenue models.
- Cheaper and smarter ops: By enabling the workplace of the future, firms can turn areas that were once reactive into proactive value drivers.
- Digital disruption: Emerging technologies such as AI, robotic process automation and blockchain offer ways to change the way asset managers operate.
Across all three of these opportunities, one thing is vital above all else: good data. As Ross pointed out: a dynamic data program is the key enabler of the solutions required to compete – today and in the future. Firms must ensure they can source robust, flexible and clean data that’s fit-for-purpose and available when and where needed.
A huge positive for asset managers is that the data they need to use is known: nearly any application or process imaginable in asset management requires some or all of master data, accounting data, transactional data, reference data and market data. If data managers can bring this together in one place and make it available firm-wide, they will have gone a long way towards helping their business overcome the challenge of scale.
Building a data strategy
Ross went on to set out some ways in which firms can build an effective data strategy. With 77% of respondents to the asset managers survey saying their firms are looking at data transformation, this is something that will affect most firms.
The key is to review the current state of data management, design a target state, understand the gaps between the two and then work out what needs to change to plug these gaps. Firms can get distracted in such projects as they focus too much on patching problems with their existing systems, rather than replacing these systems altogether. Others fall down by only considering today’s challenges, forgetting that their data model must also be ready for the applications of tomorrow, such as big data and AI.
Another potential problem with the data strategies of some asset managers is that they are not taking a broad enough view when it comes to sourcing innovation. While many asset managers agree that FinTechs will have a big impact on data management, only 40% have formal initiatives in place to assess new technologies from such providers. Similarly, 85% of asset managers say they do not outsource at all. By failing to do so, they are missing out on a significant pool of innovation, one which could solve many of their current and future challenges. This puts them at a significant competitive disadvantage.
Ross concluded by looking at how the skills required by asset managers will change over the next five years. As data becomes more central to asset management, data science and technology skills will become much more important than domain expertise. Asset managers will need to bear this in mind when building their data strategies.
Data management is, in Ross’ view, the single most important element of asset managers’ businesses today. Rather than seeing data management as a burden, firms should view it as a key value driver that can make the difference between surviving and thriving.
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