Taking Stock of Service Provider Relationships: A Survey of Asset Managers
Top 5 key learnings from asset management firms surveyed on how operating models have changed as a result of the pandemic.
Through two years of disruption from the Covid-19 pandemic, the value of the service provider as a strategic partner has become increasingly more important for asset managers. But as life returns to a new normal, the relationship between asset manager and service provider will continue to evolve.
To help asset managers meet the challenges of the future, service providers are looking to expand the ways in which they add value to their clients, while still managing the pressures of delivering high-quality solutions at competitive rates.
An integrated approach
As asset managers rely more heavily on service providers to cut costs, drive efficiency, and help them achieve their strategic goals, integrated front-to-back models could play an even greater role in the future. Indeed, an Ignites* survey of 267 asset management professionals conducted on behalf of BNP Paribas found nearly two-thirds of respondents either currently use an integrated, front-to-back service provider model or would consider doing so.
It’s important to note that the integrated model is a relatively recent phenomenon, with current offerings at various stages of maturity. However, integrated models might have to become more flexible for smaller managers.
The issue for smaller firms is that the current solutions out there are more geared towards larger firms . So, the financial commitment that a smaller firm may have to purchase a truly integrated model might be out of their range right now. That’s a challenge.
says Jeffrey Zoller, Director, US Fund Services at BNP Paribas Securities Services
Indeed, smaller asset managers have their own set of challenges that service providers will have to consider in the future. The challenge is for service providers is to help asset managers scale their business as they grow and to keep that ‘small,’ innovative, and agile mindset, says Jeffrey Baccash, head of global ETF solutions at BNP Paribas Securities Services.
“Sometimes we replace ‘small’ with ‘start-up’, but there are firms that want to be small for a reason: they want to be nimble and agile so they can create innovative solutions and move forward,” he says. “So, they need service providers that will allow them to focus their attention on innovation and building their business.”
A connected world
One of the ways that asset managers of all sizes are looking to grow their assets is by expanding into new markets and a broader product range. Therefore, asset managers will be looking for a more globalized offering, says Baccash, with providers that have experience and expertise across a range of different markets and products.
“A lesson for us –both inside and outside of the business – from the pandemic, is that the world is connected,” he says. “We’ve learned so much doing things virtually and we have new tools and technologies that might have existed pre-pandemic but weren’t necessarily being used heavily.”
It’s not just new products and geographies that asset managers will be looking for. Nor will a front-to-back model meet all their needs. Banks like BNP Paribas are increasingly offering their asset manager clients access to their financial and banking services for a more universal offering.
Firms are often looking for support outside of the traditional securities services model. It’s the ability to bring expertise and capability from across the entire bank that enables you to demonstrate value as a strategic partner to your clients.
says Zoller
Service providers are also evolving to ensure their operating models become more future-proof, so they are able to react quickly to unanticipated events.
Physically and virtually prepared
The operating environment for asset managers will unlikely return to the pre-pandemic normal, thanks in large part to the success of remote working.
“Looking back to the fall of 2019, our number-one area of focus was onsite due diligence,” says Baccash. “Now, as a result of the pandemic, activities that were in a physical setting – like onsite due diligence – now operate in a hybrid model for the foreseeable future.”
“In addition to being physically prepared; providers need to show that they are virtually prepared as well.”
*Ignites, a Financial Times service, in partnership with BNP Paribas, conducted a survey in Dec 2021 of readers who are involved in operations, work with key service providers or oversee those who do to participate. 267 valid responses were received to show this snapshot of how the industry has changed.
