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Asset managers outsourcing for better client outcomes

13 October 2020

Partnership is the future of asset management, says Kimberly LaPointe, head of PGIM Investments International

Earlier this summer I had the pleasure of participating on a panel about the future of the asset management industry which left me pondering, what will be important in the next 10 years?

In recent years, the industry as a whole has been facing multiple pressures. Regulatory change, technological disruption, the rise of passive investing, and downward pressure on fees have caused both asset managers and asset owners alike to rethink their business models and adapt to new ways of operating and serving clients. This means the industry is at an inflection point – the business models of yesterday are being dismantled as companies position themselves for the future.

Adding to these pressures is the ultimate disruptor – COVID-19. While it is not single-handedly changing the face of asset management, it is certainly playing a supporting role. With economies having shut down for much of the spring and people working from home, the pandemic ushered in change at an accelerated pace.

In short, the industry that we have known for decades is transforming into something more sophisticated and aligned with client expectations. With that in mind, what exactly does the future of asset management look like when we piece all of these factors together while maintaining the core objective of helping clients meet their objectives?

Putting the client first

Today’s clients are diverse and sophisticated, each with their own set of individual needs and expectations. For example, outcome-based investing and enhanced client service have come to the fore, with clients seeking to partner with asset managers who are able to deliver both, effortlessly. As client preferences change, it is incumbent upon asset managers to evolve to manage these shifts in behaviour.
Taking a client-first objective goes hand in hand with another trend we are observing in the industry: the move towards collaboration and co-creation. It’s not just suppliers that can become partners and collaborators; so too can clients. This may mean finding investment partners that are best in class at asset servicing, such as fund accounting, document preparation, or regulatory reporting. Regardless of the need, it is the marriage between us as a large asset manager and our service partners that will lead to superior client service and creating better results for our clients.

Joining forces to improve client experience

Given the competitive nature of the industry today, asset managers are looking for ways to do things differently. They are re-evaluating their propositions, seeking partnerships with asset servicing providers that may not only bring costs down but also allow them to better serve clients from onboarding to servicing. In the past, outsourcing was seen as a byword for cost-cutting as companies shifted focus to their core competencies and appointed third parties to manage back office and administrative functions. But we are now seeing a clear shift away from this old model to one of collaboration and symbiotic partnerships that are designed to create better outcomes for clients.

Companies realise that success in the future involves tearing down the silos that were built in the past if they want to remain competitive. This may mean several competitors will come together to build a single platform to serve investors. It may also mean building partnerships with large clients by providing them with enhanced services to help them enter new markets. Or it may involve sharing best practices in vehicle structures, compliance, and other areas of specialist knowledge.

What is happening is that companies are increasingly working together to bring a new proposition to the market. At the end of the day, it is the client’s needs that are the priority, so this operating model needs to be as seamless as possible all the way through the value chain. Operating collectively to achieve a positive outcome for clients has always been important, and this is becoming even more significant as we move forward.

Professional Paraplanner