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All indications suggest that 2008 is not going to be an easy year for the investment industry. Our specialist consultants comment, below, on some of the issues they believe will have an impact on your business this year. If you would like to hear more about any of these issues, please contact us here
Deployment of specialist front office tools
2008 will see the need for Investment Managers to deploy specialist front office tools faster. Paul Miller, Partner, Morse believes that these tools, which include EMS and dark liquidity pool access, are critical for the trading environment.
Why? As Investment Managers have developed multi-specialist capabilities, they now require multi-specialist applications. This will lead to an evolving and complex environment which will generate a compromise between trade order management functionality, pre-trade compliance checking and risk monitoring.
Derivatives: Asset-Servicing needs not being met
The derivative asset-servicing needs of Investment Managers are not being met. The immediate market response has been a surge of activity to back-fill gaps in capability. A clear example of this is the Prime Brokers coming to market with a suite of previously non-core services.
However, according to Grant Cooper, Consultant, Morse, the most notable highlight is the suite of capabilities that are not yet being considered for development within the supplier community. In his view, the most important of these to Investment Managers is the ability to measure and report on risk, performance and compliance at the strategy rather than instrument level. In many instances, the calculation of the consolidated NAV of a fund has been designed with specific risk/return criteria (such as LDI funds) and so, at present, this would give an inappropriate measure of the fund's performance.
There is little dispute over the demand for this capability in the market, however no suppliers have come to market with a solution capable of providing this service to date. The question is, will market appetite for this service prevail?
Wealth Management models converge in battle to own the client
Miles Joseph, Consultant, Morse, says that in 2008, Wealth Managers will face a challenge in owning and retaining the client relationship as the boundaries between historically siloed organisational models are converging.
The business models, products and services of the private banks, private investment managers and IFA's are becoming ever closer. This is helped by an increasing complexity in investment products and platform capabilities. The demand for more sophisticated products is consolidating the need for all firms now to go externally. The services and platforms available to the IFA's enable them to move up the investment value chain becoming discretionary managers of client assets either by white-labelling or co-branding of external investment services.
At the same time, as a new generation of clients emerge and 'old money' becomes 'new', in order to retain these relationships, private banks and investment managers have to broaden their services and increasingly offer advice outside of their traditional banking and investment spheres.
Cost reduction and 'Treating Customers Fairly' (TCF) to dominate 2008
Following the dramatic fall in cash flows into property funds (which in the last few years has bolstered expectations) the prospects for an immediate replacement to boost new money looks bleak. According to Mark Lester, Head of Retail Distribution, Morse, 2008 will be a year of reviewing operations to reduce costs, particularly in straight-through and manual processing.
In addition, the ever increasing middle office will come under the spotlight as companies question their cost and value. This will have to be balanced against the need to demonstrate the TCF principles via the new management information (MI) requirements from the FSA; this could lead to a deluge of unused paper, serving little or no purpose, unless properly managed. Many companies may miss a golden opportunity to improve their MI as they strive to comply.
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Morse presents
Over the coming months we will be presenting our thoughts around key industry issues at the following events:
TISA Discussion Forum - February 5 - London
Karen Bond and Mark Lester will be presenting on Management Information to treat customers fairly. For more information, click here.
TSAM - March 5 - London
Paul Miller, Partner, will be chairing the IT and Strategy workstream, while Grant Cooper, Consultant, will be presenting at the Derivative Operations workstream. Click here for more information.
Future of Fund Management - March 10/11 - London
Steve Cook, Business Adviser, Morse, will be presenting his thoughts on exploiting growth opportunities across Europe. Click here for more information.
Technology for the Buyside - April 2 - London
Paul Miller, Partner, presents on what lies ahead for OMS/EMS technologies. Click here for more information.
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