The Covid-19 pandemic has caused asset managers to fundamentally reevaluate how they work and interact with clients and service providers, according to BNP Paribas Securities Services.
Jeffrey Zoller, Director, US Fund Services at BNP Paribas, said that pre-pandemic, asset managers were facing a number of market and competitive pressures – fee compression, demand for lower-cost products, customized investment solutions, and the emergence of ESG.
“These challenges didn’t go away with the pandemic,” he said.
In many cases, the pandemic acted as a catalyst, accelerating trends that were already emerging before Covid-19 spread to the US.
Asset managers had to consider how they make the best use of talent, increase collaboration across functions, and accelerate decision-making, while adapting to changing workforce and customer dynamics.
The switch to remote working has been one of the most significant changes to operating models, one that is likely to remain in the post-pandemic operating environment, as staff embrace more flexible working conditions.
In a survey of 267 asset managers carried out by Ignites on behalf of BNP Paribas, the vast majority of firms indicated that they have made a material change to their operating model within the past two years, including, significant technology upgrades, reduced office space/headcount and increased outsourcing.
In contrast, just 11% of respondents say their firms made no significant changes.
According to the findings, roughly one-third of respondents say they outsourced more during the past two years.
A further 39% streamlined their key service providers, using fewer firms, but across more functions.
The survey revealed that a wider range of functions are now being considered for outsourcing.
The survey indicates that the types of functions that asset managers wish to outsource differ by size and level of sophistication.
Larger asset managers want outsourcing partners to help them achieve broader strategic goals, such as new product development and front-to-back system and data integration. Smaller firms, meanwhile, view outsourcing as a means to make their operations more efficient and cost-effective.
For example, data management is an ideal area for outsourcing in some form, according to Zoller.
“During the pandemic, asset managers had to shift and also look at how to use data more effectively internally for better and faster decision-making in order to help them quickly adapt to changes in client demands and behaviors,” he commented.
Jeffrey Baccash, Head of global ETF solutions at BNP Paribas, added that asset managers want to maximize their investment, whether it be on the service side, technology or infrastructure: “they really need optimization in order to be innovative”.
That’s why asset managers need to build strong relationships with their service providers so that the providers understand their needs and adapt with them as markets and the economic environment change.
“The pandemic certainly forced firms to react and look at the operating model of the future,” added Zoller.
“Firms are trying to be more agile and have a more nimble operating structure so that they can insulate against future issues that we might not be able to anticipate,” he said.
