The partners at Devlin Mambo have been “having a think”, which is generally a concerning thought – it tends to mean Graeme going off on a rant about diverging regulation, Cathy interpreting something very complex in the finance/ risk space that no-one has picked up on, or Simba finding a new range of Devlin Mambo branded gilets from a manufacturer with excellent ESG credentials (available at all good retailers).
Not this time, however, with the focus on the product lifecycle management and governance space at asset managers. So far, we have been debating internally with our working group, involved in discussions with the UK regulator, conducting research alongside the excellent team at Idea Group, and posting our first poll on LinkedIn. The last of these asked a simple question with 4 options to respond:
Product Governance is a hot topic in the UK and Europe. What do you see as the key issue?
- Keeping pace with ESG
- Accessible data
- Scalable infrastructure
- Evidencing value to investors
The highest score was number 4, ‘Evidencing value to investors’ with 42% of responses. This was not a surprise by any means, given the UK assessment of value reporting issues and the likelihood that Europe will follow suit with something similar. We did conclude that three key issues are inherently intertwined, aside from ESG which is going to affect all things everywhere.
Intertwined Product Themes… minus ESG
- The requirement for accessible data
In our experience, there is generally underinvestment in systems to enable both an effective product lifecycle process, as well as the MI to facilitate good governance.
The importance of having the right data, structured in the right way, which is easily accessible can often be overlooked. The prognosis for disparate sources is not good with a significant time-spend on finding data and ensuring that what is there is correct prior to doing anything with this. Anecdotally, some firms trust 3rd party data over anything held in-house – this feels wrong.
Generally, firms tend to start off with a small product range which is relatively easy to manage from personal productivity tools, such as Excel, SharePoint or even Microsoft Access databases. The issues begin to arise with success or growth through M&A activity – for example, an increase in the size of the product range, new entities, additional jurisdictions, and asset classes.
So, how could easily accessible data look in the product world?
- A product master that contains the relevant data for all products, legal entities, and their hierarchies.
- A sensible, flexible, workflow for all stages of the product lifecycle which incorporates the business specific approvals and a robust audit trail.
- A reporting engine that can be shaped to deliver committee and board reporting, regulatory reporting, and help with client reporting.
- Scalable infrastructure
When we talk about scalable infrastructure in a product sense, this can mean several different things, ranging from effective fund structures, the systems used to manage the product lifecycle, or the entities and approvals to support client and distribution activity – Scalable infrastructure can be all these things.
We see the key challenge to delivering an ongoing commercial strategy is ensuring that well designed and compelling products are available to be purchased by the right investors. A firm’s organic success, or M&A activity, can bring its own challenge and costs to firms can vary, whether this is capital or opportunity. For example:
- An unwieldy fund range with only a few effective products – cost to manage and maintain with low investor benefit, and may slow change processes internally or with the regulator
- Open share classes with little or no investment – may require seed capital and there is a cost for firms to maintain, increasing fees for the firm and potentially the investors
- Registration for distribution in other jurisdictions – the ongoing costs, both financial and to meet regulatory requirements, can be unwieldy and sales may not match expectations
- Internal and external reporting – an increase in products, entities and jurisdictions operated in means only one thing, an increase in the volume of reporting whether that is client, regulatory, committees or board
So, how do you ensure that infrastructure is scalable? A close focus on commercial, client and distribution strategies are key. An effective governance process which focuses on what is working well, where opportunity can be sought and a stronger focus on what may not be going well – often under appreciated. Useful, timely and readily available MI to identify pinch-points, wastage and a close handle on cost can help identify weakness within your product infrastructure.
- Evidencing value to investors
“We won’t be distracted by comparison if we are captivated with purpose.” (Bob Goff)
Evidencing value seems like something so simple, basic, and yet so difficult for firms to get right. Confirmed by the most respondents on our LinkedIn poll, evidencing value is the pressing issue in product governance and management.
In the regulatory space, we have seen a direct requirement for firms in the UK to provide granular evidence across 7 key pillars to provide a degree of transparency into how firms believe value is achieved by investing in their product. The methodologies, process, and output for the assessment of value process varies across asset managers and the perceived positives, as well as flaws, are well publicised. With Europe to follow suit, albeit in a yet to be defined form, this is not going away.
From the practical perspective, and by listening to the gripes of those involved in the process, collating the right information to support the methodology, process, debate, board analysis, and client reports is by far the most difficult aspect. Not all data is quantitative, however. Having accessible data to support your assessment leads to a more time spent on debate and challenge on exactly the most important points – exactly how are we delivering value and are we articulating this to our clients clearly? In the meantime, most firms will continue to contrast and compare their own analysis to the information provided by peers.
So, why are these themes tied?
In our view at Devlin Mambo, these three aspects are inherently intertwined and underpinned by a common theme – a well-oiled product lifecycle process supported by easily accessible data.
- Data powers effective decisions and we see disparate approaches to how firms deliver their product process. Generally, there will be elements of a product master in some shape or form. Despite this, lifecycle management and governance are often an afterthought which require a jigsaw-like approach to reporting across the lifecycle and proprietary solutions for ongoing product management post launch.
- Product proliferation, blockbuster products, M&A activity, and exciting new client initiatives can compound the data issue by placing strain on the existing infrastructure which is in place to support the commercial, client, product, and distribution strategy – it is rare that infrastructure is built with a consideration for growth. Clarity and evidence on how your infrastructure is performing will aid effective decisions.
- Evidencing value should provide more than a commercial view for product boards and management companies. Brand value is built upon trust and communication, therefore a culture that promotes openness about how they deliver value is delivered to the unitholders is a great place to start. When less time is spent on collating disparate data, more time can be focused on asking the right questions.
We believe there is at present a considerable underinvestment in product when it comes to an enterprise level solution to these themes. The cost of this underinvestment will become increasingly evident in the near future…
How can we help?
Devlin Mambo have extensive practical experience in designing and operating effective product and governance processes in asset managers. We help our clients enhance their product processes by advising on operating models and implementing scalable solutions that deliver better management, reporting and tracking, giving you full control of all your products.
For further information contact email@example.com or your usual relationship contact.