Asset managers: Pursue new efficiency strategies


Upgrade investor experience, expand outsourcing and move on M&A



In the current landscape, the potential for driving efficiency within asset management firms is virtually unlimited, thanks to technological advancements, expanding outsourcing opportunities, and synergies that can be gained from a merger or acquisition. These avenues offer promising ways to enhance performance while reducing costs.


Through the numerous strategies available now, asset management firm leaders can provide better service to investors; explore new markets and products; and reconfigure their workforce to achieve efficiency at a scale that would have been impossible even five years ago.


But firm leaders who embark on these routes to efficiency should heed an important warning. Outsourcing, technology changes and M&A all can alter the complexion of an asset management firm, and leaders need to be careful not to lose the unique character that differentiates them from their competition.


Headshot of Michael Patanella

“Your competitive advantage, your specialty and what you’re known for needs to be preserved as enhancements are made at your firm.”

Michael Patanella

Grant Thornton National Managing Partner, Asset Management

If your differentiator is a strong connection with a particular target market, a well-established brand identity, or a tried and trusted network that delivers a steady flow of referrals, your need to maintain that element and make sure it’s not damaged in any way by your pursuit of efficiency. 


“Your competitive advantage, your specialty and what you’re known for needs to be preserved as enhancements are made at your firm,” Grant Thornton National Managing Partner for Asset Management Michael Patanella cautioned. “Focus on managing clients’ assets and returns, your secret sauce, or the thing that really gets investors to invest with you.”


With that in mind, there’s a lot of fertile ground for asset management firms to choose from as they work to drive efficiency that can lead to better investor recruitment and retention — and stronger profits.



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Upgrade investors’ experiences


As asset managers compete for investor dollars, they’re working to improve their clients’ experiences and develop more intimate relationships with them.


A recent Grant Thornton survey of asset management and banking CFOs showed that developing customer-centric processes and principles ranked second only to streamlining operations in their digital design priorities.



Many of the strategies for strengthening customer relationships are technology-based. They include:

  • Establishing digital platforms that are optimized for mobile access, user-friendly and intuitive, with customized asset performance tracking, management, analysis and reporting.
  • Simplifying processes for opening accounts and making transactions. Here automation can be used to drive efficiency while reducing the likelihood of human-based trade management errors.
  • Using data analytics and generative artificial intelligence in your customer relationship management system to develop tailored messaging, alerts and notifications; customize reporting; and advocate for alternative investment strategies on a customized basis.
  • Use of robo advisers in conjunction with AI to deliver algorithm-based investment guidance tailored to specific investors based on the historical patterns of their past investments.
  • Using software applications for fundraising that use existing client data to minimize the amount of time it takes for them to make investments.

“There’s a lot that asset managers are doing to drive improved customer relationships with higher degrees of efficiency,” Grant Thornton Transaction Advisory Principal Scott McGurl said.


Patanella said technology improvements such as these are difficult and require an approach that’s organization-wide rather than siloed. Solicitation and analysis of investor feedback is critical, and firms need to be ready to make adjustments in an agile fashion when clients express a desire for a different experience.


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Outsourcing makes a difference


McGurl has seen some asset management firms shift their outsourcing strategies in recent years.


Routine support for back-office and recordkeeping operations that didn’t require a high degree of creativity or innovation has been outsourced for many years. Now firms are adding to the outsourcing mix selective and strategic duties that take advantage of innovative capabilities that have been developed by third parties and aren’t easily replicated by on-staff personnel.


These capabilities include:

  • Data management
  • Regulatory compliance monitoring and reporting and risk management
  • Client onboarding, account maintenance and customer experience
  • Technology-enabled, customized investment management guidance
Headshot of Scott McGurl

“Selective outsourcing that leverages advanced technology to cleanse, govern, analyze and report based on data is a big area of focus.”

Scott McGurl

Grant Thornton Principal, Transaction Advisory

“Data management is a challenge for a lot of organizations,” McGurl said. “Selective outsourcing that leverages advanced technology to cleanse, govern, analyze and report based upon data is a big area of focus. Capabilities have far surpassed routine back office operational support and are now delivering innovation in customer experience management through automation and AI integration, compliance management and market analysis. The end game of outsourcing initiatives is to accelerate profitable growth and productivity.”


When outsourcing compliance, regulatory and risk management functions to third parties that specialize in such activities, it’s important for firms to continue to exercise their own fiduciary responsibilities by maintaining careful oversight of their partners. Outsourcing won’t absolve the firm from responsibility if, for example, it fails to meet a compliance requirement as a result of faulty work by a third-party provider.


Nonetheless, third-party experience can prove valuable as compliance requirements become more complex.


“The cost of doing upgrades and keeping up with the technology and regulations locally and globally has become very high in some cases,” Patanella said. “So, partnering with third-party organizations that are focusing on these activities for multiple clients has allowed asset managers to operate more efficiently and focus their own attention on their core business.”


To preserve their unique differentiators, though, it’s critical for asset management firm leaders to make sure all outsourced components fit seamlessly into their operating model. The fabric of the organization and delivery of services to clients need to be maintained in an integrated way.


Careful attention to culture is needed to accomplish this seamless integration, especially when embedded operations are being outsourced to third parties located in a different country or halfway across the world.


“You need to bridge the geographical and cultural gaps to drive collaboration across all parties,” McGurl explained. “You’ve got to focus on establishing the values and behavioral expectations both internally and with the third parties as a virtual ecosystem. You need to think about the drivers of behavior and the cultural sensitivities that need to be developed between organizations to effectively work together.”


One simple example of a potential gap lies in modes of communication, where familiarity with different text application services in far-apart locations can create a technological barrier that complicates an already large geographic separation. Effective third-party relationships need to bridge these potential gaps as well as others, which may include:

  • Leadership visibility and collaboration across the different entities
  • Career paths for offshore partners who wish to advance beyond their existing service center environment
  • Preferences for recognition and awards that may vary based on culture or geography
  • Performance management activities that need to be sensitive to cultural differences to drive continuous improvement.

Driving efficiency through M&A


Based on data from Grant Thornton’s recent M&A pulse survey, opportunities to drive efficiency through inorganic growth are likely to increase over the next several months.


Eighty-one percent of M&A professionals predicted that deal volume would increase or significantly increase in the next six months compared with the last six months. Expectations of interest rate decreases and optimistic evaluations of the U.S. economy are fueling the forecast of a deal surge.



“There are a lot of value plays out there as we look at the market,” McGurl said. “With interest rates high but expected to go down a bit, we would expect that valuations will start to tick up a bit. The time is now for organizations to really have those M&A targets in their sights and move on them.”


M&A offers an opportunity to increase assets under management without a commensurate rise in costs, and also can provide access to geographies, products or technologies that previously were outside the acquiring firm’s reach. For example, Patanella said there’s a growing emphasis in the private equity sector on getting access to funds from retail investors through a variety of vehicles that include 401(k) funds.


“If you’re a private equity manager that doesn’t have the resident registered investment company expertise, you’re not getting access to that type of investor,” Patanella explained. “If you complete a transaction or merger and you bring in that type of company or investment manager, now you’ve opened up new distribution channels.”


At the same time, firms that have traditionally focused on public company investments may be able to tap into private credit markets if they bring in the right personnel through a merger. And whether a firm is adding new products, geographies or technologies, increased scale delivers stronger bargaining power with both suppliers and customers.



Create efficiency, maintain identity


As asset management firms evaluate efficiency options that exist in M&A, outsourcing, technology and improved customer experience, the leaders who come out ahead will take advantage of the right opportunities while still maintaining their identity, brand and differentiators.


The best asset managers deliver unique services, and they do it through efficient processes that provide maximum benefits to both their customers and their firms as a whole.



Scott McGurl

Scott has worked in industry and management consulting environments for over 25 years supporting clients define and achieve their business transformation objectives.

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