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InsideNOW

The dawn of ManCoTech

In the last few years, the pace of change has increased dramatically across all industries, especially for management companies in the asset management industry.

Management companies (ManCos) in Europe, faced with growing competition and ever-changing regulations, are being forced to rethink their business models.

Authors

Authors

François-Kim Hugé - Partner - Financial Industry Solutions - Deloitte

Arnaud Bouchain - Senior Manager - Financial Industry Solutions - Deloitte

Alessio Scuderi - Manager - Financial Industry Solutions - Deloitte

Published on 5 November 2020

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In the last few years, the pace of change has increased dramatically across all industries, especially for management companies in the asset management industry.

Management companies (ManCos) in Europe, faced with growing competition and ever-changing regulations, are being forced to rethink their business models.

Through more frequent onsite visits, regulators are intensifying their scrutiny to ensure ManCos have enough substance in terms of staff and expertise to run their business. Therefore, one of the key challenges faced by ManCos today is to demonstrate they have adequate governance and internal control frameworks in place.

Another challenge is the constantly evolving scope of regulatory rules and reporting obligations, such as the Packaged Retail and Insurance-based Investment Products (PRIIP) Regulation and the European Market Infrastructure Regulation (EMIR). These inflate the volume of data that ManCos need to collect, check, reprocess and publish, intensifying their day-to-day workload.

This scenario is exacerbated by the relative technological immaturity of ManCos, which have lower rates of digitalization compared to other industries. For the vast majority of ManCos in the market today, most tasks are carried out manually or by using standard office tools.

Current regulatory and market trends are demonstrating that the difficulties faced by ManCos today will only increase if they keep using traditional organizational and operating models. Other industries have proven that digital transformation is a key enabler of business growth and sustainability in ever-changing environments. Technology solutions, such as FinTech, RegTech or InsurTech, are widely used across different markets to accelerate business activities, support quality, automate processes and help with decision-making.

Increasing numbers of industry players are starting to grasp that investments in technology are necessary, and a better technology-driven future is beginning to take shape.

DIVIDE AND CONQUER

Let us fast-forward 10 years and imagine the technology-enabled future of ManCos. It is 2030, and ManCos are being supported by proper technology, i.e., a so-called “ManCo system” (aka ManCoTech). No one can imagine or remember how they did their work without it.

At the core of ManCoTech is its workflow management and analytics capability. It enables the ingestion of massive amounts of data and documents sourced internally and externally from business partners, such as distributors, fund administrators, transfer agents and other outsourcing partners or delegates. These are linked together through application programming interfaces (APIs) that aid the exchange of data. Then, the information is routed through workflow tools to manage the product lifecycle, similar to an air traffic control system that controls vast amounts of

external data while continuously coordinating actions to be taken.

As such, ManCoTech will be the core enabler of day-to-day operations. Based on the analyzed data, ManCos employees will be primarily making decisions and defining the way forward. For example, employees will have a holistic view of all operational and regulatory risks in real-time, with indications of the next best course of action. Through a powerful customer relationship management (CRM) tool, employees can also seamlessly ensure optimal interactions with their clients and distributor base. And, regarding reporting, a universal reporting factory will satisfy the individual and customized information needs of clients and regulators.

A “ONE-SIZE-FITS-ALL” SOLUTION CANNOT EXIST. THE INTEGRATION OF CUSTOMIZED SOLUTIONS IS THE KEY TO SUCCESS

Currently, there is no fully integrated and all-encompassing ManCoTech solution available on the market that can cope with ManCos’ abundant functional needs across their business units. This is unsurprising, as a one-size-fits-all solution cannot meet the needs of a heterogeneous industry that currently lacks organization model standards.

Overall, the factors that explain the variety of ManCos in the market include corporate structure, total headcount, authorizations to conduct regulated business activities, fund types under management, and range of services offered to clients. Every ManCo has a specific operating model, business workflow, and strategic roadmap with different business priorities.

Therefore, ManCoTech needs to offer a high level of customization to adapt to the specific business requirements of each ManCo. Every ManCoTech module must be configurable and able to adapt its functionalities to how each ManCo’s business unit is composed and business workflow is coordinated; the granularity of information it requires to perform its activities; and the reporting format to support management meetings. Finally, and most

importantly, all these components will only deliver their full value when they are interconnected. As such, ManCoTech will require multiple integration means, from the most advanced data flows (e.g., APIs) to the use of robotic processes to not only read or generate raw data files but also less structured documents such as key performance indicator, exception and management reports.

Combining business customization and technical flexibility will be the key to a successful ManCoTech solution, providing ManCos with the ease to adapt and the scalability they need. If a new set of business requirements arises, whether due to internal factors (e.g., a new policy) or external factors (e.g., a new regulation), ManCos will be able to easily implement new processes, tools or applications, leveraging the technological and organizational infrastructure of the ManCoTech that is already in place.

This also means that ManCoTech providers will be able to propose modular offerings that allow the new technology to be gradually onboarded, mitigating the risk of impacting recurring operations.

NO PAIN, NO GAIN. GET READY TO CHANGE

The often rigid organizational structures of ManCos can prevent them from carrying out lengthy and costly transformation programs. If ManCos wish to adapt to upcoming challenges, they must increase their organizational agility.

In parallel, ManCoTech providers will need to accompany ManCos through their step-by-step transformation journey. They will need to listen to ManCos’ specific requirements and business priorities, support them in identifying their current pain points and determining sources of improvements, and offer them the most suitable ManCoTech modules.

In this context, agile transformations will especially suit ManCos to tackle the cultural changes faced by their organization and staff when adopting new ways of working and using unfamiliar tools and technologies. It will be easier for organizations to measure the benefits of ManCoTech by rolling it out over time to an increasing number of service lines and functions. In addition, as quick wins and success stories will echo the results brought by the digital transformation, ManCos will gain further experience with managing their digital strategy and become more willing to invest in supplementary business cases, exploiting the potential of ManCoTech further.

Conclusion

ManCoTech is the key enabler for ManCos to remain successful in the asset management industry and offers clear benefits.

Less compliance risk: better governance and oversight reduces the reputational and financial risks of incurring regulator fines. Audit trail and document repositories allow ManCos to promptly retrieve proof required by regulators to demonstrate proper substance.

Clear cut business case: as with most solutions that offer automation, ManCoTech increases operational efficiency, allowing employees to focus their time and skills on value-added activities. ManCos benefit from better operational cost control and an improvement in their financial resilience.

Future proof: the agility that the implementation of a flexible service model and scalable infrastructure delivers makes it easy for ManCos to respond to change.

The evolution of ManCos is unavoidable. To reap the benefits of technological breakthroughs, there is no doubt that significant development and change management efforts will be essential. Clearly, the first movers to embrace ManCoTech will gain an edge over their competition, by generating increased business volumes that will largely justify the initial investment.

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