Efficiency - what’s holding investment managers back?

Is your business as efficient as it could be? Chances are it’s not.

The COVID-19 pandemic has accelerated digital transformation for many businesses and put a firm focus on operational efficiencies and costs. Data obtained from UK wealth management consultancy Compeer shows that despite heavy investment in IT and operations, many investment management businesses aren’t working as efficiently as they could be and it’s preventing them from achieving the growth they desire.

But why?

Over the last five years, spend on IT and operations as a percentage of revenue hasn’t fallen, indicating continued operational inefficiencies.

The amount of money that investment managers, full-service wealth managers and private banks are injecting into IT and operations has been increasing as firms embrace the digital revolution. The UK wealth management industry is now spending over £1 billion on IT and operations in a quest for ever more efficient, competitive and profitable ways of working.

But over the last five years, spend on IT and operations as a percentage of revenue hasn’t fallen, indicating continued operational inefficiencies.

So why are some investment management firms struggling to achieve the efficiencies and cost savings they desire? The short answer - one you might know already - is the complexity that exists within organisations.

The search for new technology is usually driven by this complexity - businesses have too many different processes or providers of software and lots of workarounds holding everything together. Many investment management businesses are in a constant battle with below-par external experience (degraded client outcomes) or poor internal experience, leaving them questioning how to scale to service clients and overcome a lack of resources. They want to know how they can do or use fewer things and deliver better, more consistent outcomes to clients.

Ultimately, they want to know - how do we do more with less?

The answer is clear. They need to simplify, with technology as an enabler, through automation and a reduction in manual steps.

With client expectations for streamlined service and frictionless experiences at an all time high, now is an ideal time for firms to embrace simplification.

“Our clients often ask us whether it is possible to use technology to drive simplification in a way that doesn’t impact on their client propositions and outcomes - cutting costs rather than value.” says Jennifer McDermott, Head of Client Solutions, Iress. “We have seen first hand that it is possible, but simplification shouldn’t just be seen as the end game. It is a key enabler to any digital transformation strategy. It has to support what you do tomorrow, not just today.”

And removing complexity is not just beneficial to driving efficiency and keeping costs down. There are many other benefits to be gained in terms of growth, scale, consistency, risk and achieving a single view of the client no matter how big or complex your business is.

Iress has produced a quick start guide for investment management businesses to help them understand technology simplification and where to begin. The report outlines 5 steps they can take to ensure that any project is well-directed and runs smoothly. You can access the guide here.