Transforming of investment management firms during challenging times

Volatile capital markets, changing demographics, technology disruptions and increasing competition to capture investment flows confront many, if not all, of the players in the investment management ecosystem.

Institutional investors, money managers, wealth managers, registered investment advisors, broker dealers and retirement services providers are facing pressures to get bigger as scale efficiencies continue to rise with assets under management. It is no wonder that so many players have embarked on enterprise transformation programs to repurpose themselves for more effective asset capture and service. Yet many transformation programs have experienced mixed results and, at times, have failed to deliver on the promises made at the onset. 

We have seen how some investment managers have distinguished their transformation programs from others, reaping benefits where others have not. Our clients’ experiences reveal that successful transformation programs are disciplined in their strategic alignment of goals and execution — we call it “getting the right things right.” This simple slogan is about structuring the transformation portfolio to comprise the “right” set of initiatives, sequenced and managed over the delivery horizon. This is easier said than done.

Timing is everything

The other part of “getting the right things right” is sequencing initiatives over the transformation program horizon. This part of the transformation equation is often neglected. It takes significant care and attention to get the sequencing correct. Considerations include:

• Transformation horizon and value realization. Most transformation programs last three to seven years. Often, the horizon is driven by efforts to deploy and implement initiatives. The efforts become an exercise of managing to project budgets and delivery timelines. Some programs have also looked at how value is being derived from initiatives — revenue improvements, realized capital and cost efficiencies, stakeholder experience impacts — in addition to program delivery metrics. Programs that take a comprehensive view of delivery budgets and timelines as well as value realization have a better track record. Having a long-dated plan is important, but short-term projects can also add value. Due to the recent performance of the markets, it has been challenging to obtain financial support for large plans, so it’s important to consider these types of projects.
• Execution sequencing. Most programs sequence initiatives by the interdependencies centered on key infrastructural components. Often these initiatives consume significant time and effort before there is a material improvement to market-facing capabilities. When the sequencing is front-loaded as we often see, the initiatives that make an impact around value realization do not occur until the latter part of the program. This back-loaded value realization can be alleviated by initiatives with short gap solutions to enable more rapid value delivery while the long-term infrastructural components are developed.
• Company engagement. It’s important that various leaders have appropriate transparency in the execution of the relevant initiatives. For example, involve key members of the enterprise risk management function in any process redesign of the sales and marketing process. Their input will be critical in determining if changes to risk controls or regulatory compliance issues could arise from the improved and streamlined business process. We have seen that critical initiatives often have significant cross-functional representation involved in the design and testing of new capabilities. This also creates buy-in for the process and will help from a culture perspective when new training and time commitment is required.
• Governance. The progress of transformation is dynamic, often calling for review and mid-course corrections. Often, organizations will have a Program Management Office comprised of executive sponsors, steering committees, day-to-day leadership and the execution teams. The majority of such programs are resourced with people highly trained in program/project management (PM). Some organizations have deployed a Transformation Management Office — the key difference is the addition of business architects, whose focus is on the integrity of the solutions and impact on value realization. The combination of PM personnel and business architects serves to review both value realization and delivery timeliness, escalating and recommending as necessary the status and mid-course corrections to the steering committee and executive sponsors for ratification.