Asset managers continue to look for support roles they can offload from their fund administrators in order to cut costs. With outsourcing of the back office already incredibly common, the middle-office is now ripe for similar efficiencies.
By providing middle-office services, administrators have the opportunity to grow revenue and develop stronger partnerships with their asset management customers. But first, servicers will need to make five key changes to their operations, processes and technology landscape.
1. Create a truly scalable operating model
The demand to service multi-asset funds across a wider variety of regions will require more administrators to adopt “follow-the-sun” operations. In other words, they’ll need 24-hour business continuity, across all time zones. With significant growth in assets under management coming from outside North America and Europe, plus a greater mix of products, you must make the investment required for your functional teams to handle increasing volumes.
2. Review roles
You must ensure you have the skills at your disposal to service new regions or middle-office products as functionalization will drastically change roles. The fund accountant’s role, for example, has been radically redefined from actively owning the end-to-end process steps to being an overseer of functions. The ability to communicate across these functions – with the customer as well as end investors – demands a new approach, and a greater understanding of the causes and impacts of problems and decisions.
3. Improve communication
It’s more important than ever for asset managers and their administrators to establish a single source of data and a seamless flow of processes. This requires the middle-office administrator to be able to communicate effectively with the front-office – making both robust workflow technology and specialist staff expertise a high priority.
4. Optimize process automation
Efforts to shoehorn solutions into a functional model, and a lack of investment in technology, have led to many administrators creating offline tools. The problem is that these additional, low-value control processes can strain the administrators’ capacity and resources, as well as create compliance and risk reporting challenges. Both innovative workflow technology and robotics process automation will be critical to freeing up skilled staff for more challenging roles that deliver greater value and can attract higher fees.
5. Increase technology investment
To boost your capabilities, you must replace unscalable systems and offline solutions, and develop a more integrated middle-to-back-office platform. That will require you to work more closely with asset managers and technology providers to build tools, technologies and services alongside one other. Remember, you can’t just develop solutions unilaterally and wait for customers to purchase them, you must look to reinforce your role as a trusted advisor.
As a fund administrator, aligning your interests with those of your customers will help you build mutually beneficial partnerships and increase revenue in the face of intensifying competition and pressure on fees. With the right tools in place, a rewarding new market could be well within your reach.