Tackling profitability challenges in asset management

Henri Wajsblat, Anaplan’s Head of Financial Services Solutions, interviewed Accenture Managing Director Julien Ciroux about profitability challenges in the asset management industry, what asset managers should expect from technology, and the benefits of Connected Planning.

1. In a context of increasing regulations and fee pressures emphasised by the rise of digital competitors, how can asset management firms sustain profitable growth?  

Recently, competition and regulation intensified in the asset management industry, which lowered the management fees that remain the principal resources. We have also seen the rise of passive products gaining market share over traditional active asset managers and signs of next-to-come market decline. In this environment, managing cost and optimising production becomes key, in addition to focusing on highly profitable products.  

Improving profitability requires deep-capacity analysis of the profit and loss (P&L) and cost centres to identify areas with the highest profit margins and assess the success of cost reduction and digitalisation programs. Gaining margin will also allow firms to re-direct benefits for investing in future sources of growth and automatising production.  

The bold movement of process digitalisation in the industry makes these types of analyses possible while reducing the time spent on low added-value tasks. However, process digitalisation efficiency will require the involvement of the full IT environment. For instance, a homogeneous cloud architecture strategy leads to an end-to-end process acceleration.

2. What key functionalities should asset management firms expect from technology to meet their profitability objectives?  

To remain competitive, asset managers must absorb significant changes in record time and with minimal effort. Regulatory requirements, for example, represent a change in which complexity and variety have increased in the past two years. Business reshaping and rebranding is also a common initiative for staying ahead of the game, but it causes significant structural impacts. Acquisition strategies are very widespread across the industry and stimulated by the exponential development of the fintechs.  

Agile and scalable technologies, available at all levels of the organisation, are required to support all of these structural changes.  

Today, agility is required to make decisions much faster and with more accuracy than ever before to compete with the new entrants. Those decisions leverage the modelling of large amounts of data to access accurate customer knowledge and exploit signals from historical and forward-looking data. New technologies offer the capacity to manage volume and granularity, project history in the future, predict market behaviour, and simulate any type of change in the organisation. All of those functionalities contribute to better client understanding and significant risk reduction.

3. Accenture recently released an “Asset Management Finance ” app. Could you explain the challenges solved by this application and how the app can help asset managers improve profitability?  

Over the years, most asset managers and asset distributors have developed complex IT architectures based on a combination of SQL servers, Access databases, and spreadsheet-based systems linked together with Visual Basic language. These tools were costly and lengthy to implement and required expert technical resources to operate and maintain them. Ultimately, these IT frameworks can be seen as a risk for the business, which is fully dependent on technology experts to operate complex models for them.

With new Connected Planning tools, there is a new way to operate these complex asset management models that makes the business more confident, too. The simplicity of use of these tools reduces the gap between what the business wants and what the standard functionality of the system can do. This approach allows a user to transfer the ownership of the models from IT to Finance, without compromising the granularity of the data and the calculations that drive the complexity of the models. Also, the implementation of the business requirements is quite fast, allowing the business to quickly measure the results.

While Connected Planning platforms address the granularity and multi-dimensionality of the calculation requirements at any level of the organisation, such solutions can also provide business analysis, projection, planning, and reporting capabilities.

Asset management controllers have often been restricted on the granularity and the variety of their analysis due to technical limitations of incumbent systems. With a Connected Planning platform, these limitations go away because the solutions provide, in real time, controllers with all calculations and allocations across a multitude of dimensions, freeing up time for deeper business analyses.