How only technology will enable service providers to offer the service they want to offer
People sometimes confuse the term “service” with the personal touch of a helpful concierge.
In fact, one of the best services that banks have offered their customers, is to get out of their way and give them a “Self-Service” solution: online banking. Online banking means you can access your money 24/7, see your statement, make payments and use plenty of other services, all without ever speaking to your bank. For banks, this has cut their costs tremendously, enabling them to focus on providing a better service through the medium of the internet. Now banks can gather valuable information about individual client habits and propose solutions that clients may want. Banks are no way as savvy as Amazon, Google or Facebook, but they do have the basic technology to help them learn and adapt to client demands.
The world of asset management is still miles away from offering such a service. Fund administrators are also far away from being able to offer compelling outsource services like performance and risk measurement that are not just cheaper, but also better quality than an asset manager can get from an in-house solution. However, the new technology that is becoming available might well mean that asset managers will be able to make the big leap to self-service solutions for their clients and do so by outsourcing to fund administrators.
Outsourcing performance measurement is a devilishly tricky process. Many have tried and most have either failed or been deeply disappointed. People sometimes think that scale can help provide a better service, but that is only true when every possible part of a process has been thought about and automated. If you have a partly automated process, each manual intervention creates great complexity and is disproportionately loss making.
The issue with performance measurement is that to be good at it requires a lot of skills and these skills do not come cheaply. When you have low levels of automation, engaging highly skilled individuals on mundane tasks is not only expensive, but unlikely to be satisfying for the employee either. The only way forward is to automate every part of the process so that you can run a very large quantity of portfolios with comparatively few highly skilled people. If this is possible, then Fund Administrators will begin to have an advantage over the in-house performance teams as they will be able to produce accurate results faster.
StatPro has been focused on how we can help our clients give their clients a better service. It is totally clear that the cloud offers not only the scale that is required to process increasing volumes of data, but also that the deployment of multi-tenant solutions is the only technological way forward. The age of individual system deployment per client is over. The cost and complexity makes it a non-starter.
For us, the technology is the strategy, the functions are the tactics. If you have the right technology framework, you can add the functions freely, allowing scalability without complexity. If you don’t get it right, then it doesn’t matter if you have the function in theory, in reality you cannot deploy it profitably. What is annoying for many fund administrators, is that they have spent considerable capital building IT solutions over the years, but unfortunately, much of this will be redundant very soon. What is more, the larger the fund administrator, the more complex and expensive the old infrastructure is. New entrants have an opportunity to offer far more reliable and well put together self-service solutions for their clients. The potential gains in productivity are in factors of ten.
If fund administrators, large or small, wish to offer their clients a better service, then they need to consider their IT infrastructure and whether it will enable them to grow quickly or hold them back. They need to think how they add value: is it expertise in analytics or is it the ability to provide perfect data at the point of use? Does the fund administrator have to own all its analytical platform or can it offer an “app store” of the best services available? If it wants an App Store, how can it provide that in an efficient manner?
Technology is changing the asset management and asset service world.
Contact us to find out more.