Phil Barker insight part two: Is Management Information the key to asset flow success?

Phil Barker

In his previous article, our retained adviser Phil Barker, former global head of EMEA distribution at Aberdeen Standard Life Investments Ltd., talked about what keeps Senior Asset Management and Platform personnel awake at night and how the ‘holy grail’ of positive net flows is a tough ask in the current financial climate.

Here Phil shares his thoughts on the obstacles, challenges and opportunities in measuring asset flows.

Too complicated to capture accurately?

Firstly, and obviously, net sales are a function of gross sales minus redemptions, and as such, thought needs to be given to both elements that result in a net sales position.

“Easy”, I hear you say! Sadly, not so. Challenges such as aggregation, delayed reporting, the netting off of bulk deals and complicated sales processes make life difficult to the point that Asset Managers cannot guarantee complete accuracy in the resulting figures and accept that information gathering is an art form rather than a scientific calculation.

As an example of the complicated nature of data collection, consider a Global Private Bank that has a central buy list run out of London, a private banker based in Zurich who uses the buy list made up of five centrally endorsed managers, who then place the deal through a dealing unit in Singapore. How do you reconcile this into meaningful data to help run a Distribution team? Likewise, the same data confusion exists in a defined contribution scheme with new contributions coming in, members leaving and retiring, change to default options etc. The options are endless.

A specific mention of redemptions here. Some groups focus Distribution teams on gross sales only, with the theory that it is the fund manager whose performance will retain the assets, whilst others look at net sales. However, in both circumstances it is vital to know as quickly as possible when money has left the business (or even better, to know when it WILL leave) and for what reason. Consequently, all Asset Managers now run a robust ‘at risk’ process focusing on those clients who have indicated that assets are under review. In such cases all the efforts of increased reporting, fund manager and senior executive access, and even a fee discount or holiday will be considered.

Over the years, alongside underperformance and change in style/manager, the most common reason I saw for redemption was “a change in allocation”, which conveniently lets the responsible salesperson off the hook. As a side note, it is important that any large exit trades are executed in a way that leaves the remaining investors treated fairly. Anyone reading this who has been involved in dilution levy discussions with clients will probably be scarred for life!

How is it best presented?

So, clearly getting decent Management Information (“MI”) in the first place is hard. Additionally, once the MI is captured, it must be presented to busy executives in a clear and concise way, ideally linked to other data such as Client Relationship Management Systems in order to give an overview by salesperson, region, channel, country and continent.

To my knowledge everyone has different preferences on frequency, granularity, format, distribution method etc, but in my opinion it is important to agree an overarching format that can be used by all parts of the business, from the boardroom to a one-on-one quarterly sales review.

How should it be used?

The data must then be interpreted. Many Asset Managers now have Business Intelligence units whose job it is to assess, summarise and most importantly extrapolate the information so that the business can be well-positioned for future opportunities. A ‘rear view mirror’ outlook is not enough. There is massive competitor advantage in seeing the road ahead mapped out with observation on future demand, trends and options.

It is important that this in-house MI is mixed with external data, giving a complete market position, including market share stats. This can be relatively easy to obtain in the UK wholesale market but is not so easy outside the U.K., and even harder in Institutional business. This is where aggregators and Fintech companies can help without giving away sensitive information on specific groups.

Working at night

“Data is the ‘new oil’ for the industry, helping Asset Managers better understand their business at many levels including flows and product suitability”, says Paul Poletti-Gadd, Solutions Director at FundsLibrary. “This requirement for quality information that is easily consumed and understood will continue to grow. FundsLibrary sits at the centre of that data flow and we continue to find new and innovative ways to support our clients”. 

In summary, understanding individual client needs is the key to strong and lasting relationships. Accurate and timely MI can help a great deal to cement these relationships. Future trend analysis can also help both parties to mutual benefit.

For those wishing for a good night’s sleep, the opportunities presented by robust and intelligent information gathering and analysis can act like an 8-hour night recharge.

Views, opinions or claims expressed on this website are those of the authors, and not necessarily the views of FundsLibrary. The content and information contained on the site should not be taken as advice. We accept no responsibility for loss incurred by any person on taking or refraining from action as a result of material contained herein.

All figures correct as at 31.12.2019.