2023: The Year of Implementation, ESG and Cultural Inclusion 

We recently attended the 9th Fund Summit in Melbourne, which focused on strategy and business implications within the investment management industry. 

Hosted by Fund Business, the Fund Summit is a thought leadership event for senior executives within the investment management industry – particularly fund managers, super funds, insurers and other wealth management organisations. 

The first session was a panel discussion exploring key themes for the year ahead and how firms can position themselves for the continuing market conditions. The panel was comprised of CEOs running significant businesses and consulting partners, providing their respective thoughts on the year ahead. 

Consolidation 

Over the last few years, the industry has been on a consolidation journey, with the number of corresponding deals being particularly high last year. Migrating through a deal with due diligence activities, which importantly includes assessing culture fit, takes a wealth of investment. The benefits are only realised with synergies that are an outcome of integration activities occurring post-transaction.    

Having a thorough plan for integration work and getting the right capability in place from the outset is critical. This should include a blended mix of existing subject matter experts (SMEs) and outside consulting support given the criticality of this phase of a deal.   

It was well discussed on the panel, that providing SMEs with a role in any integration fosters a sense of buy-in and will drive engagement as key resources feel part of the process – this is critical for change management. Providing opportunities to key people not only supports internal buy-in but will help with retention, which is key in a market where sourcing talent locally is a real challenge.

Implementation  

The 2022 / 2023 year will see an increase in operational implementation projects. The market backdrop is different to what it was last year – with higher interest rates, high inflation and geo-political factors all impacting the industry.  

When it comes to fund mergers and achieving synergies, technology plays a highly important part and removing the duplication of systems will result in lower costs over time. It is essential to automate data flow, as providing information to both members and investment teams as soon as possible is critical.   

Implementations need to focus on reducing business risk and this feeds into key project activities. A strategic Project Management Office (PMO) is also important so that the projects are executing work that will help deliver a funds target operating model. 

ESG  

ESG risk management and opportunities perspective are quickly becoming key drivers for organisations. With investors becoming increasingly aware of climate change, not wanting to see their investments contributing to the destruction of the planet. Most boards are also taking a responsible attitude towards ESG reporting, as they don’t want to see their investments going into areas like fossil fuels. This will continue to be a focus in the years ahead as the world transitions to a carbon net zero focus.  

People 

Executives are now placing more focus on the retention of talent and developing a great culture in a post-covid world. There is no question that covid has changed the way we work, with more acceptance towards flexible working. In turn, this has increased the reliance on tools that enable this, with more people working from home and in some cases outside the city locations of head offices.   

Apart from the obvious benefit of compensation, organisations are now focused on inclusion in the workforce and how we use this to attract people back into the office. Questions to staff need to go beyond pleasantries like asking how their weekend was, and take focus on how they are and how they are handling workloads.   

While the benefits reign strong, cultural batteries within organisations also face becoming drained by this new normal. People value flexibility and the option to work from home, but it is important for the culture of an organisation to encourage and enable face-to-face collaboration to build trust and foster productivity.     

Customers 

With an increased number of calls being received by the funds as members see their balances drop due to the current market conditions, executives are now providing a focus on member advice, particularly to those reaching retirement age. Members do not want to be told what to do with their money but sound advice drives loyalty, and those who received advice in a proactive way are very loyal which results in better retention.    

The advice members receive as they approach retirement age is also critical to ensure to their money continues to work optimally in their retirement years. By 2050, two-thirds of the world’s population is projected to be at retirement age. Members want to understand what their projected retirement will look like based on fund balances and current contributions.   

There are a number of learnings we can take from the UK investment pathways. Five years before members reach retirement age in the UK, the funds will increase communication with members to provide them with advice and information regarding their options to ensure correct financial decisions are made. A key focus is to ensure members can lead a good life in their retirement, with their funds going further, ensuring they do not fall below the poverty line.     

Thank you again to the Fund Summit for a great informative session with a number of relevant points discussed.