Despite the challenges posed by the persistently low interest rate environment, volatile equity markets, and increasing competition and margin pressures, significant growth opportunities still exist for asset and wealth managers, according to a recent article by Ernst & Young . The authors identify a number of key strategies to fuel growth, which include:
1) Right-size the organization’s infrastructure
To do this, managers must allot resources to “the products that generate the most revenue, and they must enhance their internal compliance function to minimize unnecessary losses.”
In addition, it is about outsourcing. “In the wealth and asset management sectors, firms need to realize that outsourcing is no longer a question of ‘if.’ It’s a question of ‘how’ and ‘what’ to outsource, and what that will mean for the firm’s infrastructure.” Over half of asset managers surveyed outsource some or all functions, and of all firms surveyed, 38% are currently outsourcing non-core functions.
Data lessons: By leveraging a professional managed data service, asset managers can reduce the total cost of ownership of their data, while significantly improving both data quality and responsiveness. For instance, a recent Total Economic Impact (TEI) study conducted by Forrester Consulting found a “typical” firm could achieve a 309% return on investment (ROI), with a project payback of under three months and net savings of $3.6 million by deploying the RIMES Managed Data Service (MDS).
2) Use data as a competitive advantage
“Deriving business value from quality, timely data will continue to be a priority as firms look to redefine business processes across the enterprise and with business partners,” notes the EY article.
However, many firms – especially smaller ones – lack the tools, expertise and underlying data to stay ahead of the game.
Data lessons: Robust data management strategies are crucial to asset management success, as new research findings by Northern Trust reveal. Yet for asset managers to develop the best practice data management capabilities required takes substantial resources – resources that can be more effectively deployed on their true core competencies.
Instead, it makes sense to partner with an external specialist that already has the skillsets and infrastructure on demand to feed asset managers with the high quality data they need to make investment decisions, and carry out their performance, risk and compliance reporting duties.
3) Diversify products and strategies
Increasing client interest in alternative investments “is driving traditional wealth and asset managers to develop new products,” and thereby foster growth, states EY. The article added: “The survey also found that 56% of wealth managers and 66% of hedge fund managers are in hot pursuit of operational efficiency and cost reduction.”
Data lessons: Firms need comprehensive, timely and customized alternative investments data to drive their product strategies. Yet they are often confronted by significant data management challenges – for example, the lack of standardization and centralization of counterparty valuations and reference data supporting the alternatives market, and the difficulties of integrating and cross-referencing the necessary data.
A managed data service can bypass these challenges, enabling asset managers to come to market with new products and investment strategies quickly and more cost effectively than if they attempted it alone.
As the EY article concludes, investment firms “must assess their core strategies and decide how they are going to optimize their infrastructure, while investing wisely in technology and evolving their product offerings to respond to changes in both market conditions and client needs.”
A more strategic approach to data management is a vital first step.