As we all return to work, hopefully rested and energised after the seasonal break, we have a unique opportunity to survey the year ahead and place focus on what will be important. So what are the big topics for 2016?
I am fortunate to have the opportunity to speak to a great many of our customers, industry bodies and other market commentators regularly and it will be no surprise that the same common themes emerge when discussing industry priorities. The usual themes of regulation, driving efficiencies and business expansion, more specifically building distribution into new global markets, continue to occupy the top spaces of most agendas. But we shouldn’t lose sight of how these same themes lead back to the same point, meeting the needs of the end investor.
Priority 1 – Managing the regulatory challenge
MiFID II, RDR, CASS, UCITS 5 and Target II Securities (T2S) are just some of the familiar examples of the ever evolving regulatory landscape. Regulation is, of course, important and arguably goes someway to help embed much needed consumer trust in our industry, but this comes at a price. A recent PWC survey reports that 83% of industry CEOs are ‘extremely’ or ‘somewhat’ concerned that over-regulation in fact impedes growth.
They are right to be concerned. We already see a trend in which resources are being ring-fenced solely to address regulatory tasks. Such moves clearly carry a direct cost, but less tangible is the impact this has on diverting resources away from innovation and development.
Taking MiFID II compliance as an example in point. Let’s not forget that one of the core driving aims of MiFID II is to protect the end investor. It aims to ensure they are offered better choice and value with the ability to make their own informed decisions or access appropriate advice. But when some commentators are predicting that compliance costs for fund manufacturers and distributors will run into the many millions, who is covering this cost? Ultimately, the end investor.
In the UK, the FCA are currently conducting their review of Asset Management Firms – in short a competition review. As with MiFID, the consumer is again at the core of this initiative. Who can argue that placing such focus on serving the needs of the investor is anything but a good thing? Delivering value is after all precisely the job at hand.
Priority 2 – De-risking distribution into new markets
With the cost of managing regulation alone set to remain high, it is all the more important to look to building new revenue streams and identifying new markets and new investors.
Many of our fund manufacturer clients say that this also means tackling the challenge of how to best approach entry into new geographic markets. What funds will attract the right level of investor? Who is the right distribution partner? All this together with understanding the local regulatory landscape can make expansion into new markets a potentially high risk investment.
The tools available to support Fund Managers in this respect are limited, providing some market insight which is often far from timely, and all too often limited in scope. To meet today’s market needs, accessing quality, timely data is critical, whether looking at internal data sets, benchmarking your own business against peers or learning from what is happening in the market. Big data has become a widely discussed topic particularly across the financial sector, but less so when it comes to how it can benefit mutual funds.
Priority 3 – Building operational efficiency
Failing to sustain a focus on efficiency improvement carries with it the risk of enabling new entrants to attain an upper hand.
Investors already have choice and with the expansion of initiatives such as those already discussed, tomorrow’s investor will also have perhaps greatest clarity than ever before of the entire wealth market, as well as their personal investment portfolio.
Client fees and charges will become an obvious differentiator. All players in the industry must look at tackling costs throughout their respective value chain. It is always easier to improve margin by addressing unnecessary cost and removing inefficiency from a business. Put simply, optimisation of the front, middle and back offices is now of critical importance.
So what is the solution?
In the 25 years I have been in this industry we have seen fundamental change but I would argue that the pace of change and the breath of focus is now at an all-time high and will only continue to expand.
The starting point that would help properly address many of these challenges is in having the ability to have clear insight across the business and through the value chain. A business can only make the decisions right for itself when presented with the facts.
We at Calastone already provide many of these foundation components today – by automating the operational trading flows, we equip clients with an electronic view of this data.
In 2016 we are focussing on how we can support the industry further by providing insights and intelligence drawn from our own transaction network which already covers the key global markets. We have the ability to help clients understand distribution at a sub-nominee level, globally. This unique tool supports both the management and expansion of your business and address regulatory challenges including MIFID II.
So here is my New Year gift to you all. I am offering to any of our clients to undertake an end-to-end trade cycle operational review and document where you are today and provide recommendations as to how you could optimise your business, so that you can at least have the data to drive decisions.
What better way to start the New Year?
Chief Commercial Officer, Calastone
To take advantage of Jon’s New Year offer of a trade cycle operational review and to learn about Calastone’s new data services solution– please email [email protected] for further information and to book a review.