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Perspectives

Is this the year for investment companies to look inward?

Takeaways from ICI’s 2017 General Membership Meeting

There was no shortage of lively discussion at the 2017 Investment Company Institute (ICI) General Membership Meeting (GMM). But this year’s conference seemed different.

June 14, 2017

A blog post by Doug Dannemiller, Investment Management research leader, Deloitte Services LP

Rather than much of the discussion focusing on a single theme (last year the theme was innovation), this year participants addressed a range of ideas. There was an even mix of discussions on technology, regulatory issues, growth, and organizational culture. This variety made identifying the one big takeaway from the GMM more difficult.

After reflection, I think I found it. Without an overriding external issue dominating investment management (IM) firms’ time and resources, perhaps it is the time for introspection and strategic differentiation. IM firms may now have the opportunity to examine their key strengths and hone their operating models to accentuate these strengths.

To be sure, technology, regulation, and growth are still important themes. Rather than having external forces dictate the investment of time, energy, and capital, there may be an opportunity for IM firms to look inside first and then direct efforts in a way that improves upon key differentiators.

To capitalize on this opportunity, investment managers need to know what makes them special, or why their customers choose them over the competition. Most firms inherently know their key differentiators, but too often they don’t incorporate these values into externally driven operational changes.

Investment managers need to know what makes them special, or why their customers choose them over the competition. Most firms inherently know their key differentiators, but too often they don’t incorporate these values into externally driven operational changes.

– Doug Dannemiller

Expanding scope to enhance differentiation

One potential example of expanding scope to enhance differentiation relates to firms that appeal to customers with a particular portfolio construction approach.

Let’s assume that an IM firm’s strategy fills a niche in certain types of investor portfolios. The introspective approach says prioritize the customer and the strategy, even in externally imposed development efforts, such as the mutual fund modernization rule.

Ask the question: What can the firm leverage in mutual fund modernization development that improves customer value? And how can the firm expand the project or leverage the resources devoted to this effort to meet these customer requirements?

When IM firms are overwhelmed with externally driven forces, it becomes very difficult to identify and make extra investments that serve other purposes, such as customer experience. However, when regulatory deadlines are extended or the pace of regulatory change subsides, there is opportunity. Resources may be utilized effectively to enhance the customer experience and drive differentiation, as well as meet the regulatory requirements.

Making regulatory development more efficient

Weaving regulatory compliance into the fabric of the organization is a major theme of Deloitte’s recent report, Building regulatory ready organizations. The idea is that firms can make regulatory development more efficient through discipline and practice.

Perhaps the ICI GMM conversations signaled that now is the time to blend regulatory development projects with overall strategic goals and customer positioning, making regulatory readiness a two-way street that includes a lane for strategic differentiation.

If IM organizations truly have a moment to pause from the fast pace of regulatory compliance driven development, perhaps the scope of these endeavors can be expanded. All of this depends on tighter collaboration, and creative and holistic thinking, with a goal of achieving multiple objectives (regulatory, operational, and customer oriented). Perhaps projects that started with just one goal can be expanded. This sort of scope expansion is not possible when organizations pushed to their operational limits.

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What are your thoughts?

Did the ICI GMM signal that the burdens of regulatory driven projects have reached an apex? Is this the year for enhanced IM firm differentiation, through extension of externally driven projects into projects that also serve customer needs? Please share your thoughts on this important topic with us.

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The opinions expressed in QuickLook are those of the authors and do not necessarily reflect the views of Deloitte.

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