Many of life’s lessons are universal and can be applied in both our personal and professional lives. For one, managing symptoms is no substitute for addressing an underlying issue. We all know removing an allergen is much easier, less painful, and less expensive than continually treating the symptoms of allergies. The same lesson applies in our professional lives, yet time and again, I’ve seen asset management organizations choose to treat the symptoms of a problem rather than the underlying cause.
Today, many asset managers are going through a rebuilding process to address technology and operations shortfalls. While great to see, the question begs, could this have been avoided? How much easier would it have been to take preventative measures early on and forego the painstaking process of a rebuild? Instead of addressing the early warning signs of software or processes that didn’t meet business needs, most firms engineered stopgap solutions, remaining blind to the cumulative effect their tactical decisions had over the years. Competing priorities and a cost reduction mentality has led to an increasingly bespoke and manual processing environment that doesn’t complement a long-term strategy. Going forward, firms that can recognize and address symptoms earlier will be better positioned to chart a less disruptive course driven by iterative corrections vs wholesale changes.
Here are a few symptoms to look for.
People symptoms
Busy not productive
Without fail, I notice my clients are often double/triple booked with meetings all day long—not good! This tells me there is confusion as to the priorities for the firm. Too many initiatives lead to abandoned projects or worse, a poorly implemented solution due to time constraints. Leadership needs to be coordinated and communicate the top one or two critical goals. It is more effective to execute on one initiative with focus than to spread the same resources across many that compete for their time. The phrase "when everything is a priority, nothing is a priority" comes to mind.
Technology symptoms
Manual not automated
Unfortunately, the creation of offline macros and/or other bespoke processes to address an unexpected operating issue often become a permanent fixture within the operation. At first, these changes are small enough that the incremental workload appears innocuous. The problem is that over time, the operation becomes saddled with one-off manual processes and key man risk. Processing shortfalls should be met with strategic technology fixes, either by working with vendors to get solutions on their roadmap or, in the case of internal proprietary builds, development to embed the needed functionality. While more time consuming and costly upfront, strategic solutions often pay off with greater efficiencies and a more scalable operating environment down the road.
Process symptoms
Wants are many; needs are few
Running an effective asset management operation has its share of complex requirements. For example, no one would argue the "need" to provide a timely and accurate daily cash report. It is foundational to trade execution and ensuring investment strategies can be met. However, what should be challenged are the 10 different ways this report is produced and delivered to satisfy the "wants" of the front office. Bespoke middle office processes often originate upstream with the demands of traders and portfolio managers. The efficiency game, while core to the middle and back office, should no longer exclude the front office. It has been my experience that the front office is adaptable to change when provided with suitable solutions. Firms need to get comfortable tempering the many "wants" of their organization.
So now that you know some symptoms what’s next?
Preventative measure
Checkups
We don’t think twice about heading to the doctor for a check up every year. It makes sense that we seek out an expert who is able review any symptoms we may have and ensure we are operating optimally. Whether we choose to address the underlying issue or manage symptoms is another story, but you get the point. Firms should be assessing the health of their operations at least once a year. Committing to do so is ensuring the firm is focused on rooting out problematic behaviors that deteriorate the operating environment over time. It is understandable that in a cost reduction, result-dependent environment, people get stuck in tunnel vision. How quickly, and with how little money, can we get this project completed? The truth is firms are living organisms with many interdependent parts. It is good sense to check the pulse every now and again and see if some iterative measures are warranted.
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