Case Studies
BACKGROUND
A large Canadian pension fund manager needed to replace their outdated performance measurement and attribution platform. After years of asset growth and complexity, the investment manager was constrained by homegrown systems. Additionally, reporting on portfolio and benchmark relative performance information grew into a highly customized system of data staging and visualization dashboards. Operations teams struggled to fulfill new requests using manual processes, Excel and outdated technology.
The head of Finance and Performance Operations engaged Transformative Strategies to lead the vendor selection process, provide strategic guidance and planning, and prioritize the firm’s requirements to ensure the vendor solution recommendation would alleviate operational pain points and be able to implement new business features.
ANALYSIS
Transformative Strategies managed the critical task of client-vendor communications, ensuring all stakeholders understood the RFP methodology, delivering consistent research across vendor solutions, clarifying incomplete RFP responses and client questions, and providing a cost-based analysis. Transformative Strategies facilitated workshops with the client operational team leads to identify key requirements and pain points that would refine our analysis of the vendor responses for individual business or technical requirements. Transformative's RFP response scoring tools consolidated and codified reactions from client representatives. We then leveraged data visualization tools to evaluate vendor scores relative to key requirement categories in order to validate differentiators.
Once we identified the leading vendor, Transformative Strategies planned a proof of concept based on a focused set of use cases. Our consultants organized historical datasets for use cases, readied comparative test results, and monitored workshops that allowed client users to directly test complex configurations and complete operational use cases. Tracking the status of vendor proofs and solution recommendations proved critical to prepare the client for a confident decision-making process and a rapid transition to implementation.
RESULTS
Transformative Strategies' methodology empowered our client to confidently select a vendor based on a detailed RFP scoring analysis, in conjunction with a proof of concept based on real data and focused use cases. Guiding the program over these hurdles and proving tangible outcomes gave our client the data needed to make a vendor decision and move forward with a large transformation project. Transformative Strategies provided a strategic view of long-term objectives that alleviated operational pain points. We also leveraged our knowledge of industry solutions to identify key differentiators between vendor capabilities.
Finally, our expertise helped the client overcome a challenge many investment managers face as they endeavor to retire legacy technology and balance the need for major investments to transform operations and prepare for growth.
Case Studies
BACKGROUND
Transformative Strategies was engaged by a multi-billion dollar wealth management firm to map and refine their client experience from initial prospect contact through the entire engagement lifecycle. The firm desired to provide increased scale for client and company growth while maintaining the level of excellence that has resulted in an extremely high retention rate.
Furthermore, the firm sought to understand the current state environment and create a client journey map that identified issues, or scalability concerns. This entailed examining process flows, documentation, client servicing, client communications, and client data flow through the various systems including trading, accounting, performance, and the CRM platform.
Transformative Strategies was asked to review each touchpoint and document the client journey to establish a future state view as well as the creation of a corresponding roadmap and execution plan to address any pain points, gaps, and improvements in the process.
ANALYSIS
Transformative Strategies divided the engagement into two phases:
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Phase One – Current State Analysis and Requirements
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Phase Two – Future State Visioning and Transformation Planning
Phase one consisted of several guided intake interviews with key members of the firm across the client and data touchpoints and the collection of any relevant documentation of the processes and procedures in place for review. From this information, Transformative Strategies was able to catalog high-level processes and assemble system flow diagrams, process diagrams and identify gaps and pain points within the current environment. These areas were confirmed as prioritized topics for review with business stakeholders during future state design sessions.
Phase two was focused on the development of the future state vision and defining a roadmap that provides a clear path to positively impact the client journey and allow for additional growth across the firm. Several design sessions were held with key stakeholders to lay the foundation for the future-state roadmap. This exercise embraced design thinking methodology and allowed for an accelerated cross-team alignment and knowledge sharing focused on an improved client engagement that supported the ability for growth.
RESULTS
Transformative Strategies identified top priority actions within each of the firm’s key business areas. The high-level client journey map broke the interactions down into specific steps that highlighted where these current pain points existed and recommended actions for remediation.
By providing an independent and unbiased future state vision that incorporated both business and client needs, Transformative Strategies built cross-team consensus. This brought together key stakeholders within the firm that allowed for knowledge transfer and team alignment in establishing the future state design and roadmap.
With this information, management was well-positioned to maintain excellent client service and position the firm for continued growth into the future.
Viewpoint
Discussions
Facing the Challenges of Mergers and Acquisitions
Solving For Scale: Transforming Investment Operations To Meet Rapid Growth
Revolutionizing Investment Operations with AI-Driven Data Catalogs
Data-Centric KPIs Enable Effective Management of Investment Performance Operations
Thought Leadership
INVESTMENT OPERATIONS IS AN ASSET, NOT A LIABILITY
What is the role of investment operations in asset management? Should asset managers insource, outsource, or use managed services? The decision is a difficult one. Discussions around modern target operating models and how to utilize investment operations have highlighted the benefits of outsourcing middle and back-office functions. Lowering expenses and limiting the scope of core competencies to portfolio management have driven more asset managers to consider outsourcing. Operations teams are routinely viewed as a liability instead of an asset on the corporate balance sheet, not a core competency. Although outsourcing has many benefits, I discuss an alternative approach in this article. I challenge common perceptions and discuss how an internal investment operation can drive superior performance by providing more organizational control, long-term cost savings, and better-quality data.
IS SHORT-TERM SAVINGS WORTH THE COST?
An agile change management process supporting an insourced operation is an effective way to create efficiencies quickly.
An outsourcing relationship is a partnership and, by its nature, results in less strategic and operational control. When implemented correctly, outsourcing leads to short-term reductions in expenses by reducing staff on both operational and technology teams, saving money from technology/hosting providers, and lowering the firm’s financial risk profile. The short-term savings from outsourcing operations come with a trade-off.
Outsource providers are integrated within operational workflows, data, and technology as a critical component of an asset manager’s operating model. By doing so, the relationship is expensive and disruptive to unwind. Onboarding a new outsourcing provider requires significant resources to integrate with their systems and, in the case of U.S. mutual funds, possibly changing custodian banks. Asset managers no longer have unilateral day-to-day or strategic control over areas of their business, and the engagement is long-term because of the expense, expertise, and disruption it takes to leave an outsourced provider.
Process improvements, strategic projects, system upgrades, and new data providers may all have to be routed through the outsource provider before getting implemented. Getting a strategic change on two company roadmaps and resourced correctly is much more arduous than doing it yourself. An agile change management process supporting an insourced operation effectively creates efficiencies and navigates strategic initiatives with less friction.
LONG-TERM CONTROL OVER EXPENSES IS A DIFFERENTIATOR
It is common for service providers to use a variable cost model by charging fees based on trading volume or assets under administration.
Margins are tightening, and competition is fierce within asset management. Asset managers are lowering their fees to attract investors. According to an ICI report titled “Trends in the Expenses and Fees of Funds, 2021” (Duvall, James, and Alex Johnson. 2022), equity mutual fund expense ratios are over 50 basis points lower than in 1996 with economies of scale and competition referenced in the report as factors. Lowering operational expenses is a key driver for generating company profit and can be used by asset managers as a competitive advantage through lower expense ratios.
When evaluating whether to outsource investment operations, the cost savings on projected financials can look attractive and explain why many asset managers choose to outsource over insourcing. It is common for service providers to use a variable cost model by charging fees based on trading volume or assets under administration.
This variable cost structure will increase expenses over time as asset managers grow, creating a drag on long-term growth. Firms with a scalable, insourced operating model and the right technological solutions can stabilize their expenses while growing their assets and diversifying product offerings.
Technology is advancing rapidly, and vendors have front-to-back SaaS offerings to support asset managers in a single system. Cloud-based solutions offering interoperability with robust partnership ecosystems provide asset managers with powerful tools for managing their operations at scale. As more firms outsource and providers exercise control over the market, there is an opportunity to differentiate with a vertically integrated operating model. Partnering with the right technology provider and implementing robust investment operations can reduce costs and widen margins while outsourced managers watch their costs rise over time.
Events
PMP Training Course MN Board of Education
Advanced Agile concepts Training Class
Investing
UPCOMING EVENTS
INVESTOPS USA
MARCH 11-13TH, 2024
Meradia is looking forward to being back at the InvestOps USA 2024 event in Orlando, FL as a sponsor.