Over the past decade a combination of regulatory and policy drivers, economic and market conditions have created significant opportunities and challenges for the global Investment industry.
Faced with these challenges, many firms are looking to implement new operating models to ensure greater client connectivity, relevant product and solutions offerings, more efficient business execution and lower operating costs.
Historically, the formation and delivery of corporate strategy has fallen into the purview of CEO’s and their boards. The in-trays of Asset Management leaders have grown hugely and the need for more structured support in this space is becoming a necessity.
Over the last 12 months, we have seen a spike in our clients asking for talent in internal strategic consulting. In this short paper, we discuss the context for such demand, the role a Head of Strategy might play in supporting CEO’s and their Leadership teams and the attributes required in such a role.
Given changing demographics, evolving technology and ever tighter competition, focusing on distribution is a top priority.
Access to developing economies – either through direct distribution or more likely strategic partnerships with local players.
Digital innovation as the ultimate disruptor. Firms that effectively develop their digital capabilities will transform disruption into opportunity, building strong client relationships and demonstrating market leadership.
A Move from Product to Solution:
Product propositions must change to offer customers greater certainty of outcomes based on a better understanding of their risk appetites. Firms must also provide greater transparency about the availability and details of products they offer.
Firms must focus now on client segments with growth potential and make tough decisions on suboptimal investment strategies. Improving the client experience through strong value proposition, exceptional service and appropriate charging models is imperative to retain market relevance.
The growth of low cost, index tracking funds is causing systemic issues to active fund managers. How best to deal with this trend – build your own capabilities, defend the value of alpha creation in volatile markets or straddle both options – will define the success or otherwise of most institutional and retail investment managers.
Regulatory Pressure Leading to Margin Pressures:
The need for greater transparency around risk, cost of doing business and pricing of funds is leading to escalating compliance costs.
Aggressive cost cutting, redesigning the operating model and thoughtful investment in infrastructure should help protect margins.
These issues – and more – require strategic thinking to make big decisions. And CEO’s of Investment Firms are increasingly looking for specialist talent to help.
The Role of a Head of Strategy
The requirements of a Head of Strategy vary from firm to firm. The key question is how effective ExCo’s are at delivering this change and the extent to which they have the bandwidth to build macro perspectives allowing them think strategically and holistically about the needs of their businesses.
Where gaps in capability exist – either in bringing an external perspective to their thinking or being better at executing agreed strategy – a Head of Strategy can be invaluable.
At a high level, most firms would look to a Head of Strategy to deliver in the following areas:
Thought Leadership - delivering thematic research and commentary on the external market and macro trends that will impact clients, markets or business.
Innovation - sourcing, qualification and ‘introduction’ of emerging and innovative concepts, business models and capabilities, leveraging the firm’s broader investment ecosystem.
Business & Market Reviews - delivery of ‘independent’ business reviews, tracking and reporting on competitive and market activity.
Strategy & Planning Process - leading the end-to-end strategic planning process, working in partnership with business, finance and technology to develop/refresh the firms strategic plan. Provide content support though independent business reviews, modelling support and challenge.
Consulting Project Delivery - supporting the scoping, and delivery of strategic initiatives and ‘special projects’ under the sponsorship of the CEO and ExCom. This would include corporate oversight of external consulting engagements.
Merger & Acquisition - development, target sourcing and delivery of M&A strategies; all deal management.
Corporate Performance Management - definition, tracking and reporting of the organisational KPIs and balance scorecard production; tracking and reporting of strategic initiatives.
The role is not to “tell” the leadership of any Investment firm what to do. At its heart, it is about engaging with issues the industry is facing and supporting the translation of those issues onto the firm’s business model, product suite and current geographic reach. Factors for the Head of Strategy to consider include:
- Scale and breadth of existing business and ambition to grow. Current strengths of investment proposition vs market demand – current and future.
- Size of existing balance sheet and appetite of leadership to invest for growth.
- Ownership structure of the firm – bank/insurance owned Asset Managers need to have broader perspectives on investment and growth strategies of their businesses.
- Public firms have access to “paper” meaning Strategy lends itself more often to inorganic growth. Private firms are less likely to view such M&A activity as a core part of their strategy, unless they decide being part of a bigger group makes strategic sense.
Attributes of a Best-in-Class Head of Strategy
Given role is firm-wide, encompassing relationship management with Investors, Distribution professionals, infrastructure and governance teams, a highly developed relationship management skill set is paramount. Without a deep interest in engaging all internal stakeholders, the incumbent will fail.
A depth of financial services experience, often preceded by an early career in strategy consulting, is a pre-requisite. The credibility that such a background would bring is the starting point for broader discussions with ExCo’s about the change required to deliver future profitability to shareholders and employees.
Some clients look for experience that is complementary to existing geographical footprint or investment style. This means the Head of Strategy can have an immediate impact on current thinking as they have faced similar issues at previous firms.
Other clients might seek to hire professionals who can bring new experiences and thinking to add to existing knowledge bases within the firm. This may be related to experience of regional distribution for firms seeking to enter those markets or investment experience to bring to bear new thinking to existing investment leaders as they seek to broaden out their product waterfront.
At a high level, we look for the following experience and attributes:
Multiple years of experience of strategy consultancy at a senior level, gained with a top tier strategy consultancy with time spent ‘in industry’ in a relevant strategy / corporate development role.
Strong project and programme management skills.
Proven ability to manage Board level stakeholders.
Broad-based leadership skills, able to direct, coach, mentor and develop talented professionals at a variety of experience levels and locations.
Ability to build relationships across a variety of business functions and levels.
Strong networker to include external network of key stakeholders in the industry.
A global mind-set.
Challenging times in the global investment industry mean CEOs and their leadership teams are under constant pressure to make big decisions – both for the short term and long term. Whilst external consultants remain relevant in supporting decision making about change to internal business models, product sets, cost of doing business, the role of an internal Head of Strategy to lead on delivering this change is growing in importance.
This evolution is unlikely to slow – our hiring profile reflect this. Getting it right, however, is not straightforward.