Asset Management’s ‘Lockdown Legacy’

Priorities for the asset management industry in 2021-2022 have been heavily influenced by Covid-19, but also by factors such as technology change, drivers for efficiency, and maintaining regulatory compliance. We recently hosted a JPSB Webinar, “Challenging ‘The Lockdown Legacy’ in Asset Management”, where we were joined by senior industry panelists Daron Pearce (former CEO Asset Servicing EMEA, BNY Mellon), Joanne Marlowe (Founder & CEO, UFT Commercial Finance) and Julie Abad (Director of Operations, PGIM Fixed Income), in a discussion moderated by Julia Streets (CEO and founder of Streets Consulting).

Many questions from an engaged audience helped the discussion, giving us lots of feedback.

We are taking this opportunity to reflect on the key messages of the event and our thoughts on the takeaways that we should all be considering.

Key takeaways from our panel discussion:

Planning for resilience in a distributed world

The pandemic served to highlight the importance of resilience in a widely distributed company network. Over the last year we have basically been operating in what can essentially be considered as business continuity mode. Our industry has been working for an extended period, in an environment including trade-offs or concessions that were originally only envisaged as temporary or short term.

Close attention will be needed when revising business continuity plans (BCP) as a result, particularly over previously hands-on collaborative processes, system configurations, document retention, data security and cybersecurity in general. Julie Abad from PGIM Fixed Income commented, “While certain things have already been set in motion thanks to COVID, there are still certain strategic decisions that need to be made. For example, if we plan to have a significant percentage of our workforce remain working from home.”

 Automation for efficiency

Among the key challenges faced by firms has been the handling of manual operations, especially when they are collaborative. There is new momentum for automation and the removal of manual processing. Examples include the increasing importance of new automated tools that can help in areas such as Anti-Money Laundering (AML), Know Your Customer (KYC) and Know Your Business (KYB) screenings. Technology is needed to help ensure that the parties involved are indeed the expected parties.

Data Assets

Organisations have needed to safeguard data assets to ensure they are under suitable control at all times, especially when short-term operational changes are being driven by external events such as lockdown. There is a critical process of understanding and mapping any unique data assets firms might hold, which must be safeguarded, and yet made accessible in processing to maintain competitive advantage. The digital journey is very much about using data assets and systems to drive increased value and maintain effectiveness in dynamic and competitive markets. Daron Pearce noted, “Asset managers need to focus and map out their unique data assets: this is an essential step in the digital journey. There needs to be a real understanding of which data sources are special to their individual investment process, and what are those that they can buy from third parties.”

There is a risk that firms are left behind and could be disadvantaged by constantly having to aggregate a number of different data sources. It is imperative to maintain data quality and use automation to accommodate client requests in a more timely fashion and to be able to provide a bespoke level of client service.

Human welfare and future working patterns

“The human element was far more central to the impact of being locked down suddenly,” asserted Joanne Marlowe of UFT Commercial Finance. “At the onset it was very difficult to manage the lack of in-person contact, but as it went on, people began to realise on a human level that it was okay to have your child run into the room during a meeting. This aspect radically changes the dynamic with regard to building trust, and understanding, far more effectively than sitting over a business lunch. You get a lot more insight as to what makes that person tick.”

From a human standpoint, most firms managed to maintain high levels of connectivity and communication amongst clients and co-workers. Today, communicating via video has become a new normal (it has even resulted in a significant uptick in client events, and attendance rates). The intensity of work days can be increased, however, by home distractions because there is no longer a defined boundary between office and home in some cases. We need to start thinking about new ways to adapt and ensure the welfare of workers and colleagues, and family. Burn-out is an increased risk and ideas such as ‘video-free Fridays’ have merit. We also need to consider how best to build and maintain relationships without face-to-face interaction. 

Corporate identity and culture have traditionally been shared organically within the company by interaction and co-working. Also, mentoring is an intensive activity when handled remotely. There is a critical requirement to overcome the challenges of losing corporate knowledge previously shared internally. Information based on experiences in working with clients, key relationships, and the values and history of an organisation - this kind of knowledge is extremely difficult to convey remotely to new starters.

Location

Following reports of some very large firms insisting that their employees return to the office, our panel expressed surprise about this focus of ‘where’ work is taking place, rather than the outcomes and productivity achieved. To find the balance between productivity and mental health is going to be the key, I think, through what I call “compassionate leadership”.

Industry reaction and success of business as usual

Overall, the scale of the relocation of people and the reengineering of relationships, management processes, local procedures, and operations throughout lockdown was remarkable. Indeed, one global custodian was successful in upholding their client communications while switching from a culture of 95% in-office to become a “work-from-home” organisation involving over 20,000 new devices, all within a 3 week period.

On a positive note, it is evident that participants in business, on all sides have shown great willingness to collaborate and extend tolerance when required in the lockdown scenario.

Focus

Instead of organisations expecting to do everything themselves, many are now focusing on their core processes and differentiators, and considering how they can work with partners especially in distributed situations to get there quicker, and for less cost. “We’ve seen an enormous pivot from the big banks, asset managers, brokers and other service providers to collaborate and partner in a way that they were not willing to do 18-24 months ago,” said Daron Pearce.

Consultancies have a part to play, in providing assistance at every level of the organisation to provide advisory support, to implement changes, and to help with transition. Our panel observed that some firms have put off dealing with large developments around legacy infrastructure due to the events of the past year.

Here to help

Our panel noted that as lockdown hopefully recedes, firms will invest to respond to the lessons learned.

As a consultancy, we at JPSB are here to help. This event and our panel have shown us that major lessons have been learned, that firms have found new strategies from adversity, and as a community there is a high degree of common understanding to make things work.

We are very strongly reminded that the human component of our industry remains a top priority, and social care and welfare must be taken seriously as part of a holistic response to the new ways of working.