Investment management COOs must increasingly have a financially-oriented mindset in a climate filled with uncertainty.
As operations head, your success is not only measured by improving efficiency and middle- and back-office performance. Reducing operational costs is also your duty.
Simply focusing on your own department is not enough. Threats to cash flows put pressure on advisory firms’ bottom lines, and as a result, money managers are scrambling to lower costs. One of the things on the cost-cutting chopping block is operations.
By thinking like a chief financial officer, you can position your operations in a way that better meets the challenges that lie ahead for registered investment advisors.
Beat your CFO to the punch by taking measures anticipating the financial headwinds:
The factors above threaten investment advisories’ revenue streams, and if these are long-term trends in the financial services industry, it’s time to think about how your operations is prepared to handle the changes.
As the saying goes, “Failing to plan is planning to fail.”
Talks of a US-China trade war can rattle the market. Even tweets from the President of the United States have an effect.
How will your clients’ investments be affected? How does market volatility affect your own firm’s financial footing?
Hedge fund, wealth and asset management cash flows to an extent are inherently unpredictable, and by keeping this in mind, you’ll be more focused on strategies that stabilize and minimize the costs.
Think about:
Fund administration outsourcing companies can provide the cost savings, scalability and operational efficiency a modern investment advisory firm needs to stay competitive.
Consider the benefits of outsourcing or the risks of not outsourcing.
“It’s all about the bottom line.”
If investment firms stay in the red long enough, prepare to send out your resume.
Operating directors should think about how their middle- and back- office management practices impact the financial standing of the firm.
If you can show that, as a manager, the policies you’ve implemented have reduced costs (significantly), then you won’t be a target at the next executive management meeting when finances are being discussed.
Cliché as it may sound, but you’re all on the same team. By taking initiative in any way to help your investment advisory firm stay alive and thrive, eventually it repays you in the form of secured employment, and hopefully raises and bonuses!
Although we’ve talked about threats to cash flows, what about not being prepared for an influx of new business and the revenue along with it?
You want to provide equal professionalism and world-class service to all of your clients, but what happens when your reconciliation and performance reporting team is overworked, understaffed, or not skilled enough to perform the tasks in demand?
If you’ve concluded outsourcing as one of your middle- and back-office solutions, you’re that much better prepped to handle a surge in new clients, more accounts and assets under management.
You can beef up staff when times are busy and scale back when things slow down, without a negative impact on operational performance.
By keeping up with investment management industry trends, and by taking proactive rather than reactive measures, you’ve positioned your firm to seize the opportunities while heeding the warning signs, reducing operational and financial risk.
Thinking like a chief financial officer does not mean you have to be one. After all, you’re not presenting the financial reports to the stakeholders.
But by playing your part in reducing expenses, you’re making the actual CFO’s job easier when he or she is presenting a financial report that looks attractive to the stakeholders.
As an investment operations manager with a financial mindset, you’re becoming an indispensable asset to your company.
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