Dushyant Shahrawat, Senior Research Director of CEB TowerGroup, in conversation with Neil Smyth

Neil Smyth: As an analyst, do you see changes in the way capital markets share information and communicate with clients? What would you say is the chief driver of this change?

Dushyant Shahrawat: Absolutely, Neil. As an analyst over the last 15 years, I’ve extensively covered what’s happening in the capital markets industry and particularly the buy-side. On the investment management side of the business, there is a lot of pressure in terms of transparency and disclosure, regulatory requirements and competition, which is driving asset managers to service clients differently than they have in the past. There are two main business drivers for these changes. First is how geographically dispersed workforces have become and second is the dramatic increase in the volume of information we all are processing. In a CEB TowerGroup survey, 76% of the respondents said that the change in the time spent in finding & reviewing information particularly as it pertains to the volume of information, has increased a lot over the last three years.

N: Is this unique to the investment industry?

D: No, there are several examples in different industries which also illustrate this change in information sharing. In the US, the Environmental Protection Agency (the EPA) rolled out a program for energy companies to share more information with clients around energy usage called the portfolio manager tool. I live in Boston, where the local energy company is NSTAR; the portfolio manager tool enables NSTAR to share with my building’s owner in downtown Boston, how much energy is being utilized by the building per square foot, by unit of people. So for every individual in your office how much energy you are utilizing and also provide a comparative measure to other buildings in the neighborhood. That’s a pretty powerful tool.

N: Would you say new regulations have exerted further pressure on improving communications?

D: Increasing regulatory burden is a major concern for capital market firms globally. Currently, 93% of asset managers believe that new regulations will have high impact on a firm’s IT strategy and implementation decisions. Data suggests that regulatory pressure is as much a concern today as it was back in 2009 and 2010 when we were still coming out of the throes of the financial crisis. So new regulatory pressure is driving changes across the industry, including impact on how we communicate with clients.

N: Let’s talk about technology. How do you see emerging technology in aspects of client reporting and communication?

D: Yes, we are seeing changes and growth both in advisor-facing and client-facing technology. When it comes to client-facing technology, we see high return potential and market readiness for on-demand reporting. This means not asking a client to wait until the end of the quarter to expect a report back but the client being able to drive reports and investment performance as and when they want to on their timescale, versus the asset manager’s timescale. We also see immense value and high return on investment on interactive client portals. CEB Towergroup sees new capabilities being adopted which will help in client communication in retail and institutional asset management. These include mobile capabilities, online presence, document management, regulatory libraries, transparency and system integration. Changes in client reporting capability will improve client interactions, increase operational efficiency, and maximize ROI for wealth management firms.

Read: New Insights for Asset Managers: How Technology Can Drive the Most Effective Middle Offices

N: What business benefits are capital market firms seeing by improving information sharing?

D: The market is shifting from simply automating the institutional client reporting process toward this concept of integrated client communication which is through a single platform being able to share all data that you have to be managing on behalf of a customer including portfolio performance, your market expectations, and even your investment commentary. Integrated client communication provides a single platform to store all shared data assets across all customer touch points. This allows users across the firm to easily access and configure documents to meet client requirements on an ad-hoc or scheduled basis. Adopting an integrated client communication strategy means that the same platform can be used by sales, marketing, and operations groups as well as for customer delivery. Such a platform can also help clients meet regulatory reporting requirements.

Client reporting uses the same data objects that are found in line-of-business and customer facing applications. There is a growing trend to use these same data management stores across processing, customer service, sales, and reporting. Risk and finance functions at financial services institutions are pushing the requirement to use the same data sources, validation methods and processes across the front, middle and back office.

CEB TowerGroup believes the sharing functionality within StatPro Revolution has significant value to asset managers as client demand for unscheduled and daily reporting increases across business lines.

N: Do you see the asset management industry adopting cloud at the same rate as other industries?

D: So when you look at cloud adoption across industries, financial services seems to be a bit behind but I think every year the obstacles and negative perceptions concerning security and reliability are going away. Despite regulatory concerns and data security issues, institutions are planning to increase cloud usage attracted by its numerous benefits of scalability, elasticity, metered usage, on demand nature and easy maintenance.

Neil, I’d like to end with a real-life scenario of how portfolio sharing can actually help improve client communication.

Take an asset owner, such as a pension fund, endowment, or a foundation that has direct fiduciary responsibility to manage money. They use investment consultants extensively and if the portfolio manager needs to get back to a client about how the fund is doing, well you’ve got to depend on the investment consultant, the pension fund consultant, whoever that interim company is, to actually collect performance across all of the funds that you’ve allocated your assets in before you can get back to the client the true idea of how their funds are performing. This is particularly true in a master fund structure of if you are using a lot of fund of funds.

In a federated portfolio sharing paradigm it gives you a lot more flexible access to the portfolio manager. So, they have the ability to actually look at, if not entirely what the investment consultant is looking at, at least a fair share of what the consultant would look at. They’ve got more real time information, more control over reporting back to their clients and have got a better sense of how their fund is performing across different investments that the fund is actually invested in rather than completely being held hostage by the investment consultant. So this concept of information sharing can enormously enhance client communication in institutional asset management.

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