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Back office in the front line

As asset managers look to reengage with retail investors, a fully integrated, data-driven approach can help to build trusted relationships

What will your typical customer look like in 2030?

Perhaps more importantly, what can you do now to ensure they will want to do business with you over the coming decade and beyond? This might seem like an unusual starting point for a blog about back-office functions. But if we’re not adding value to the customer experience in one way or another, the digital generation will vote with their feet.

In an age when product development decisions are driven by data, we at Linedata expect the back office to play an increasingly crucial role in customer acquisition and retention. Past pursuit of cost efficiency by outsourcing and distributing through fund supermarkets has cut asset managers off from retail investors.

To grow assets over the next decade, managers need to re-engage quickly and relevantly. Or someone else will.

Serving a new generation

Generation Z (that’s anyone younger than Amazon) has grown up in the shadow of the financial crisis. They experience the world largely through smartphones (71% of US 18-19 year-olds use mobile banking). Savers, rather than spenders, they appreciate innovation, advice, and engagement. They often choose apps, not service providers, and will make up a third of global consumers over the next decade.

Where possible, the new generation of investors align personal values with commercial and financial decisions, with 90% believing companies must address social and environmental issues. According to Deloitte, Millennials and Gen Zs “start and stop relationships with companies for very personal reasons, often related to a company’s positive or negative impact on society”. If you can’t show how your ESG fund is doing good as well as delivering returns, for example, you risk being dropped for someone that can.

"Savers, rather than spenders, they appreciate innovation, advice, and engagement."

Serving these customers means knowing them and interacting with them regularly. That’s close to impossible in the absence of a digital medium and accurate data about their financial goals and life events. Many active managers outsourced their fund accounting and transfer agency functions in recent decades, to focus internal resources on delivering returns. Back-office operations were streamlined, but managers were flying blind, in terms of end-investor information.


Back office in the front line

The quantitative easing era brought a rethink, with active managers struggling to differentiate against passive funds and facing intense cost and performance pressures. As part of their cost-reduction drives, managers are eyeing platform fees, but also reappraising transfer agency as a potential revenue centre. By re-establishing direct distribution channels, managers can mine customer data to shape product development strategy and client experience.


This can support much-needed differentiation through the development of highly tailored fund offerings in the ESG space, as well as personalised reporting, with users selecting specific metrics, channels and schedules. After all, Gen Z is as diverse as any other cohort, despite common tendencies, and effective analytics will be critical to meeting and anticipating their needs.


Beyond pure product selection, a data-led approach can also help identify when and how to best deploy customer service resources. Insight into key events or decision triggers can help managers to anticipate client challenges and retain investments. The more a manager can demonstrate their value, the stronger the foundation of trust and the longer the customer relationship. 


Accessing the data on which to build better targeted products and more responsive customer service experiences has profound implications for transfer agency and fund accounting. Managers will depend upon truly end-to-end processes that allow for timely data flows and analysis. And with regulators applying greater scrutiny to operational resilience, such processes must be subject to greater oversight and control.


More specifically, transfer agency solutions must support sophisticated levels of self-service by customers, similar to the responsive functionality offered by the apps on which challenger banks have built thriving Gen Z franchises. Crucially, they must also allow managers to harvest customer data to help them to define customized funds.

"To fully harness the power of investor data, asset managers require the transfer agency and fund administration processes to be agile, transparent and fully integrated across the value chain."

The Rise of the Millennials: Shaping the Future of the Investment Fund Industry

Harnessing investor data

Some investment managers are finding that back-office insourcing offers the best route to taking back control of the client relationship and leveraging data to deliver a value-added digital customer experience. To fully harness the power of investor data, asset managers require the transfer agency and fund administration processes to be agile, transparent and fully integrated across the value chain.

Too often, outsourcing transfer agency to third-party administrators (TPAs) means relying on embedded, legacy systems that were not designed to handle today’s data management needs. Similarly, fund accounting systems and processes must become more automated, flexible and efficient, delivering faster turnaround times, process integration, and the resilience now demanded by regulators.

Back-office outsourcing arrangements that have often failed to fulfil their original expectations are under increasing pressure. Responding quickly to fast-evolving demands and developing trusted long-term relationships with a new generation of investors requires asset managers to leverage intelligence from customer interaction more effectively. If this is not being provided by your TPA, it can potentially be achieved in-house, via a flexible data architecture developed and maintained through strategic vendor partnerships.

Barely in their 20s, we don’t yet know enough about Gen Z’s investment preferences, but the writing is on the wall. According to the Morgan Stanley Institute for Sustainable Investing, 95% of millennials are attracted to sustainable investments. As savers who take little on trust, Gen Z will prove challenging but rewarding customers. To provide a data-fuelled, differentiated customer experience, the back office is now in the front line.

About the author, Michael Galvin

Michael Galvin is Global Product Manager for Linedata’s fund accounting platforms. With 25 years in the industry, he has led the development of core applications, surround technology, and process management solutions for fund administration and investment management firms. Michael began his career as a fund accountant at JPMorgan Chase.

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