- |Organisational Consulting
All fund management houses seeking to grow their business face the challenge of growing in an increasingly competitive market. In the late 1980s UK names such as Mercury Asset Management, Morgan Grenfell and Phillips & Drew managed a significant proportion of UK fund assets – few will recognise such names now. Nowadays US and European organisations have a significant slice of the pie. At the same time, those who advise their clients on the selection of managers – the investment consultants, wealth managers and IFAs – have struggled to cope with the increasing proliferation of managers and products. Even those with a significant (and expensive) research resource rely on the interrogation of databases to reduce the list to a manageable size of organisations they actively research.
The larger fund management houses have, by definition, already made it (although size doesn’t bring immunity to adverse market changes – a topic for another day). Many can demonstrate extensive breadth of product/services together with depth of expertise.
Nevertheless, there are many smaller fund management houses who have a good story to tell but struggle to make it past the database screens and/or their lack of brand awareness. Faced with these challenges, what might the smaller fund manager or boutique do?
Many business leaders will argue (quite rightly) that their people are their key ‘asset’. As such, smaller fund managers can generate a competitive advantage by focussing on how they organise and develop their talent within the business.
Leverage talent: Fund management is an intellectual battle of wits. Individuals who succeed in this environment need to be smart and bring an intellectual edge. The working environment that best supports such talent isn’t one where people are forced to conform to set thinking processes – instead, such talent will flourish if it is given as much unfettered control as is possible. Smaller fund management houses have the flexibility to get that right by providing an environment that is stimulating, supports development and provides opportunities for growth.
Deliver excellent client service: Smaller fund management houses should be in a much better position to provide a personal, tailored service to their clients than their larger counterparts. They have the flexibility to engage with their clients without the constraints larger houses need to put in place.
Communication: Get your team talking! Research from MIT indicates that effective communication is the key foundation for a High Performing Team. Face to face communication trumps all, followed by video, phone then email. We know of some firms who are wishing to cut overhead costs by cutting back on travel costs. Our advice is to do so carefully. We’ve also come across a number of larger fund management houses where the challenge is achieving an efficient interface between the research analysts and portfolio managers – smaller houses should be able to do so with ease.
Agility: Whether it’s responding to changing market conditions (how many committees were consulted when responding to market volatility associated with Brexit?) or to client requests for a change to the product/service, smaller managers should be in at least as good position, or better, to effect change to the benefit of their clients and staff.
Alignment for growth: Business development shouldn’t be the sole remit of the business development team. Achieving a common understanding of the sales strategy across all business functions creates a real focus for growth. Larger organisations have the challenge of achieving ‘joined up’ processes across the various ‘silos’ of business development, marketing, client management, portfolio management and operations.
In many cases the main barrier to exploiting these advantages is a mindset that is resistant to change. We can learn from the work of Professor Carol Dweck of Stanford University. Her work is summarised in ‘Mindset: How You Can Fulfil Your Potential’, which is the result of over thirty years of systematic research into the psychology of achievement. Her findings, based on work with students, teachers, businesses and individuals, have resulted in her placing Growth Mindset principles and practices right at the heart of personal and professional success.
From this we find that developing our mindset is possible. The plasticity of our brain is well documented, as is our capacity to learn and adapt. Change can occur with time, practice and determination. Again, smaller fund managers have an advantage here. The Leadership Team, themselves motivated towards a Growth Mindset, can accelerate positive change throughout the business at a far faster rate than is possible in a larger organisation, positioning the business to take full advantage of the people component to gain that competitive edge.
Author: Russell Borland