Asset Management Target Operating Model (TOM) Trends

4 min read

Over the last 2-3 years, almost every major strategy house has predicted the imminent demise in the growth of assets under management and revenues that the asset management sector has experienced over the last decade.

Identifying the trends

 

It is clear that this demise, alongside other key trends, is already playing out. These other key trends include the consolidation and reduction of market participants, the increasing complexity of market geographies and demand for non-traditional asset classes and the growing importance of global client fund and investment distribution access.


The one obvious and imperative trend that is not yet being seen is the need to reduce costs in the medium-to-long term. I believe that this is because any cost saving initiatives will have limited impact unless they address the underlying operating effectiveness and efficiency of the organisation - therefore, that means initiating an often dreaded “target operating model” programme.
 

Responding to the trends


Most asset managers are not geared up to mobilise such large enterprise level change programmes and besides, there are other more urgent business opportunities to be getting on with. If all that fails, surely the emerging technology will fix things? We all want to do what is urgent, easy or interesting but I can’t stress enough that addressing the operating model bogeyman, complex as it can initially seem, is becoming critical.

Besides, the target operating model work does not have to be a grand and complicated undertaking if structured properly; it is complementary to the rest of the business change agenda. There is some big thinking needed, but the commitment to a multi-year enterprise programme is not necessary anymore. In fact, I would advise against it. What is more important is the introduction of a long term culture and capability for organisational change rather than a one-off “mega” programme.

In this new long term commitment to change, the implementation capability of the organisation will be just as important and maybe even more important than the choice of strategy.
 

How to approach the TOM

 

Why not try these three steps to get started:
 

1. Create an ability to devise a target operating model and on an ongoing basis, verify and prioritise it within the context of any changes to business strategy.
 

2. Choose the right partnerships and change model required to deliver projects on an ongoing basis.
 

3. Select projects for delivery within the framework of the target operating model based on short-term execution effectiveness linked to prioritised and value assessed outcomes.

 

In simple terms this might look something like:
 

1. Define target operating model “type” based on market opportunities and business strategy such as;

  • Flexibility to adopt new or unique assets or strategies

  • Scalability to handle more AUMs, trades or funds

  • Management of costs or enhanced efficiency

  • Focus on core activities and outsourcing of non-core activities

  • Creation of opportunities for superior investment performance

  • Emphasis on a risk management culture practices
     

2. Select partners such as M3S Consulting to operate within a centralised, segregated or federated model of choice embracing continuous improvement, lean, agile change culture and techniques.


3. Clarify execution priorities, for example;

  • Ensure proper data quality

  • Embrace the digital / emerging technology opportunities

  • Better manage IT expenditure & investment

  • Re-evaluate outsourcing priorities

  • Redefine the role of execution professional
     

Use techniques such as impact mapping to create a list of execution initiatives focussed on achieving specific value assessed business/service outcomes.

M3S Consulting are well positioned with experienced and committed practitioners to support the improvement of the operating effectiveness and efficiency within your organisation. Contact us, we are happy to discuss any aspects of target operating model trends in the Asset Management sector.