The financial services industry is increasingly affected by the rapid impact of technological development.
The ease at which data can be gathered, shared and integrated is transforming the financial arena, with the phenomenon that is fintech now visibly widespread across the financial spectrum.
For global institutions, SMEs and start-ups alike, navigating this minefield of change management brings both common and unique challenges, often simultaneously.
Adopting and adapting a suitable business strategy comes with some formidable challenges, writes Byron Murphy, managing director at Farringdon Asset Management in Singapore.
Clarity is key
One of the biggest urges to overcome is the desire to want to be universally popular and appeal to anyone and everyone.
Knowing what you do well and who would best benefit from this is a leading factor in ensuring success.
Once you can demonstrate a genuine “value add proposition” you must be just as clear on which segment would truly benefit from this proposition and duly focus all your efforts on capturing and conserving those clients.
Experience shows that a common reason both small and larger businesses struggle to excel is simply due to a lack of focus, wanting to appeal to as broad range of potential clients as possible rather than becoming experts in a particular field.
This ultimately leads to being “a jack of all trades and a master of none”.
In this day and age, where excellence and specialisation is paramount to a business’s fortunes, concentration is critical.
Don’t get weighed down
Similarly, the same can be said for the selection and cultivation of core business partners.
The financial services industry has been dominated by leading institutions for decades often in the form of banks, insurance companies, custody platforms and fund managers.
Some of these monoliths have managed to adapt, whereas it’s fair to say a considerable number have failed to embrace change in any meaningful manner.
While it’s undoubtedly true that things are often easier said than done, businesses have to be committed to change and accept that this means weaning off of their older more established relationships and committing to forge new partnerships with like-minded and more aligned business partners.
Moving away from familiar territory is uncomfortable, without the necessary drive it will be impossible to achieve the momentum required to ensure mutual commercial viability.
Solid foundation
Another key factor is people.
It has become a cliché to say that any business is only as good as its people and yet it is still very common to see firms routinely put quantity over quality, or to put it another way, volume over substance.
I have always advocated that 90% of compliance is who you allow to carry your business card in the first place.
This has never been as evident as in today’s world of connectivity and intelligibility.
Yes, businesses need to be lean and flexible; but in order to ensure as effective and efficient a proposition as possible, the core functions need to demonstrate diversity and competency.
This is particularly relevant if your business is looking to engage with an international clientele.
Any truly international business should be able to demonstrate capability and suitability, particularly with regard to cultural differences, motives and practices.
Understanding these nuances are often best learnt from personal experience, hence the reinforcement of needing to onboard and develop as diverse a team of experienced professionals as your budget will allow.
Know your limits
Scalability comes hand in hand with compromise.
All too often I have witnessed projects that start out as one thing and then, by the time all the “optimisation” measures are in place, they end up being all too similar to the very thing they were conceived to compete and counter.
If your proposition is to offer a tailor-made solution, how can you then pool everything together?
If you are building bespoke portfolios how can the proposition centre around a limited fund proposition?
Low cost does not necessarily warrant suitability for the masses and higher fees rarely translate to outperformance.
The strategy you aim to employ has to be thought through thoroughly and tested frequently.
While having confidence in any business strategy is important, overconfidence is dangerous, as many will know and to the surprise of most executives, the Dunning- Kruger Effect has proven to show that the relationship between confidence and capability is, in fact, an inverse one.
Better to been uncertain
While the needs of retail investors, high net worth (HNW) and ultra HNW clients share common themes, attempting to crudely adapt uniform solutions to address their particular needs would be naïve at best.
This is particularly relevant when your business model centres around unbiased advice or a best of breed proposition.
Saying something is merely right or wrong is generally wholly inaccurate, I believe it is better to say it is simply different. Companies that look to vertical integration, aiming to be a “one-stop shop”, can be highly effective for certain individuals but claiming to be impartial would be a stretch, to say the least.
Equally, businesses that promote best of breed and/or unbiased advice would have to submit a strong case when defending white labelling or the wilful distribution of an in-house product.
Gone are the days when companies could rely on hollow mission statements and opacity. Clarity and purpose are fundamental to any sound business strategy, difficult elements to ascertain in a world suffused with doubt and insecurity.
However, as the French philosopher, Voltaire stated: “Uncertainty is an uncomfortable position. But certainty is an absurd one.”
This article was written for International Adviser by Byron Murphy, who was managing director of Globaleye in Singapore, which was recognised in International Adviser’s Best Practice Adviser Awards 2018 for Business Strategy in the Asia region. He has since joined Farringdon Asset Management in Singapore as managing director.
The awards are run in partnership with Old Mutual International.
