Asset Managers (AMs) are seeing their revenues tighten due to competition, market volatility, regulation and client demands; all of which erodes margin.
To grow and achieve scale, many are now focusing on ways to maximise their unique selling point and leverage the value it brings to clients; cost is often a secondary consideration outside of finance departments, although this is likely to change with the current volatility we see in the market.
Firms that are successful in managing cost focus less on immediate “cost out” and more on reducing the marginal cost of growth. With this as a priority, firms establish an understanding of current cost hot spots; what drives cost, what is scalable, and what is not. They link this to their forecasts and growth strategy to understand where they need to invest, ensuring their transformation departments deliver the underlying platform that scales with the business strategy.
The relative maturity of cost management differs across firms, and whilst there is an appetite to control costs tightly, firms can focus too much on managing today’s costs tightly, and not on transforming to manage cost growth. This can range from not truly understanding where cost is within their business, to not knowing what drives cost growth, to an inability to stress test variable costs under downturns, inflows or outflows.
There are multiple causes of this, but the most common themes Alpha sees are:
- The strategy & vision not being fully understood or articulated across the business
- A lack of discipline on delivering tightly to business priorities
- Years of underinvestment which means too much is spent catching up and maintaining
Asset managers need to critically assess themselves against 8 key vectors, as per the below diagram.
Where to get started? Thinking Big but Starting Small
Understanding where you are today and how you compare to the wider market is often the single best way to begin to align your firm around an agreed starting position as a basis for improving.
Within the industry, clients typically occupy one of three position:
- Market leading: No immediate issues with their current cost base and confidence they can scale – Maintain; ensuring controls and planning cycles keep the operating platform scalable
- In the Pack: No immediate issues with their current cost base, but recognise that they cannot easily scale – A need to understand what drives cost and align transformation efforts with their strategy effectively
- Lagging: Immediate issues with current cost base and a recognition that they cannot scale – A need to understand drivers of cost and strategy alignment, combined with a realignment of the current cost base
Alpha helps clients understand their current position and provides asset management specific recommendations that support transformations to save and scale, rather than the simplistic cost cutting lists AMs will have seen before.
If you are interested in discussing further, please get in touch with Jon Reed, Executive Director at Alpha FMC at enquiries@alphafmc.com.
About the Authors
Jon Reed
Executive Director
Jon is an Executive Director and joined Alpha FMC in 2008. With over 15+ years of consulting experience, Jon has extensive experience of running large Change initiatives across global AMs; advising on and delivering both transformations and cost management initiatives as well as shaping multi-year roadmaps to drive AMs’ strategy. Jon supports clients in both advisory and delivery roles and is typically involved from early stage strategy setting (Vision, Target Model and Business Case) through to delivery.
Richard Lavelle
Associate Director
Richard is an Associate Director and joined Alpha FMC in 2014 having previously worked in consulting and in-house FS strategy teams. Richard’s experience ranges from supporting AMs define their strategic vision through to large scale implementation. Richard has delivered Agile re-organisations, Enterprise IT implementations, Cost Transformation initiatives and Strategic Target States for several UK’s leading AMs.