The following commentary is from Shaun McGee, senior product manager, investment services, at financial technology at Fiserv.

Regulation is doubtless one of the key drivers of investment in fee billing and revenue management technology for asset managers. But the changing needs and expectations of the investors themselves also have a significant role to play when it comes to influencing the requirements of the technological infrastructure that asset managers rely on to accurately handle their investments.

Investor behaviour is driven by a whole range of factors: investment strategy, willingness to take risks and desired outcomes from their portfolio. A fragile economy and market volatility are pushing investors to seek ever more value from their investments. They are looking at the costs and fees related to investment products and advisory services and demanding transparency as to charges.

As a result, investors are shopping around and evaluating both the firms to invest with as well as the products, to identify how they can cut costs and add more value to their portfolios.

This need for billing transparency will escalate even further once the Retail Distribution Review comes into effect. This piece of regulation, designed to safeguard the investor in volatile times, will come into effect on 31 December this year, bringing with it new rules for advisor charging and handling legacy assets and trail commissions. Now that an array of choices is available, standard and stale product offerings don’t appeal as much to these savvy investors. In addition to this, investors now expect a more personalised service – asset managers cannot stay competitive with a one-size-fits-all approach.

If investment firms are to maximise revenue and remain competitive, they must be able to offer innovative products and individualised advice.  The ability to evaluate and accurately bill for diverse portfolios will be central to their ability to manage the added complexity of invoicing different products and client fee arrangements.  It will also play a key role in allowing flexibility and instilling trust to retain new clients who want customisation and transparency.

Current picture

The current market environment dictates that there is little value to be gained from “lazy”, less complex, investments, driving the most ambitious investors to invest across a range of products, including cross-border. This then requires firms to have a fee billing structure in place that is able to handle diverse asset classes and currencies, in multiple languages, to support asset managers who are faced with making increasingly complex calculations based on a widening range of fluctuating data, from fixed management fees to fees that incorporate performance based calculations.

Offering a customised investment experience is the only way for financial institutions to cope with the bespoke needs of savvier investors. This requires the flexibility to offer and support a wide array of products and pricing structures. Firms’ ability to thrive in this competitive and complex environment moving forward will therefore be underpinned by an effective billing service, necessitating the replacement of manual spreadsheets with automated processes.

Having centralised technology to manage all assets and pricing structures will help investment managers respond to investors’ demands for transparency, and make it easy to understand exactly how and what they are being charged, in multiple time-frames. Automation will also reduce revenue leakage to investment firms caused by missed billings – for firms which persist with manual processes, managing exceptions to fee schedules can waste between 8 to 12 per cent of the time of each full time employee engaged in the fee and revenue function.

So, from the investor and investment firm perspectives the only sustainable model is one in which automated processes facilitate product diversity and operational efficiency. This will enable investment firms to focus resources on what is most important - their clients.