What are the major trends and challenges Singapore’s wealth and asset managers face when constructing, managing and reporting on their investment portfolios?
That was the focus for the panel of experts at the recent webinar hosted by SS&C Advent and WealthBriefing.
We came together to discuss the findings of our latest joint report on portfolio management efficiencies in Singapore, and get our panellists’ insights into today’s most pressing technology and operational issues.
Our discussions ranged across nine key topics:
1. The impact of Singapore firms’ under-investment in technology
WealthBriefing and SS&C Advent’s research found IT inadequacies are widespread among industry participants, with less than a quarter of respondents’ set-ups said to be satisfactory.
As my fellow panellist Steve Knabl, Chief Operating Officer and Managing Partner with Swiss-Asia Financial Services, pointed out, to date many investment managers simply haven’t seen a pressing need to automate. “But to achieve sustained growth, they will need to control processes via systems, and not rely on Excel spreadsheets.”
2. Manual intervention in portfolio management needs addressing
Manual processing remains huge: two thirds of respondents estimate more than half their work must be completed manually. But investment managers no longer have the time or margins to tolerate such inefficiencies and risks. And clients won’t stand for it either.
For industry consultant Dennis Harhalakis, one of the most telling statistics is that 50% of firms spend over an hour on manual interventions to their portfolios. “Reducing the time spent doing these activities should be a priority, because firms are trying to show clients how well they’ve invested their funds for them.”
3. Investment preferences of Asian versus international clients
Whereas international clients often focus on tax structuring solutions, such as to mitigate inheritance tax liabilities, locals in Singapore tend to target growth and returns, which is driving diversification into alternatives, noted Mike Buffini, Associate Partner at St. James’s Place Wealth Management.
Many firms developed bespoke offerings to meet these different needs. But if they are to grow, service offerings and their supporting systems must become more institutionalised and standardised, added Knabl.
4. Popularity of alternatives and leverage
Demand for higher returns is driving significant growth in alternatives and leverage usage. The big issue for portfolio managers is how to value the alternative assets, assess and manage the risk, and report on them, said Buffini. Remaining compliant with clients’ risk profiles is a further challenge.
5. Improvements to performance reporting capabilities are essential
Transparency through clear and timely performance reporting is a key client demand. Yet performance reporting emerged as a real pain point in our survey.
The problem is many firms’ portfolio management activity is spread across multiple systems. That makes collating and reconciling the datasets, calculating performance and providing a timely 360-degree view of clients’ holdings a major challenge.
6. Operational challenges facing external asset managers
As EAMs grow and partner with more wealth managers, they will need to work with an expanding array of banks. To cope, they need both a good system, and seamless electronic connectivity to these counterparties, said Knabl.
Thus far, many investment firms have simply hired people to manually input the data. Clearly that’s not scalable. Which is why SS&C Advent developed a cloud-based solution to provide automated daily data feeds from more than 800 custodians. Clients then only have to deal with exceptions, freeing time to spend on more value-adding activities.
7. Which is better: best-of-breed or unified platforms?
As Harhalakis observed, the answer to this long-debated question depends on the size and type of investment manager, and client segment it serves.
For instance, digital-only offerings may run off a single unified platform. For bigger firms, the model that’s emerging is a core banking system linked to either best-of-breed vendor solutions or in-house software developers.
8. How investment suitability requirements impact portfolio management
Wealth managers must now evidence they’ve undertaken the correct profiling and questioning, and are monitoring the investments put in place. Following portfolio reviews, regulators also want evidence the options have been discussed with clients, and that any changes are documented.
“That’s where we’re seeing a big headache,” said Buffini.
9. Reaping business benefits from ‘forced’ compliance spend
Rapidly-rising compliance costs mean many firms have put off non-urgent technology upgrades that could deliver strategic business advantages. But we believe opportunities exist to do both.
For example, the right technology enables firms to use the data they collect during onboarding and investment suitability monitoring to better segment clients, and thereby offer more appropriate products and services.
To obtain a copy of the WealthBriefing and SS&C Advent research click here.
And to learn more about how SS&C Advent can help investment managers cut costs and grow their business, contact firstname.lastname@example.org.