Size Does Matter

Murray Bender: RBC Investor & Treasury Services is pleased to present insights on the future of asset and payment services across the globe. Today’s podcast features Evelyn Foo, a Canadian-based asset and wealth manager consultant, discussing some of the key opportunities and challenges for managers. Thanks for joining us, Evelyn.

Evelyn Foo: It’s my pleasure, Murray.

Murray Bender: To start, Evelyn, tell us a bit about your experience working with asset and wealth managers.

Evelyn Foo: Well, I’ve been in the industry for over 30-plus years, so that’s quite some time, in successive senior roles, in operations, risk management, compliance and governance. I’ve worked at both large organizations and very small ones. Some of the large organizations are the other banks—CIBC and TD. A medium-sized firm I was at when I was first entering into the industry was Franklin Templeton, and then more recently, before I set up my own firm, I would call it a boutique, and that’s Galileo. I also happen to be a professional accountant.

Murray Bender: Based on what you’re hearing and seeing out there, what are the key opportunities for the asset and wealth manager segment?

Evelyn Foo: Well, I think the one theme that’s coming out is, change is constant. Some of the opportunities that I’m definitely seeing from a trending standpoint are that there’s definitely more assets coming from different spaces. So, that’s the high-net wealth. Sovereign wealth funds are also taking a prominent role.

There’s also an older demographic definitely that’s entering the marketplace, and especially with the pandemic and people worried about their mortality and therefore, maybe decided to retire earlier as well. And the switch from relying upon their company’s pension plans to taking control of their own assets that are out there.

There’s alternative assets that are coming into the space. I’m looking at real estate, private equity, even into that crypto market but probably much more so in the blockchain space.

The other piece that obviously is a theme out of the pandemic is technology, digitization. So this bodes well for streamlining processes and also improving the experience on the front-office side and also, the back-office side with streamlined approaches for trading and settlements.

Murray Bender: Evelyn, what do you consider to be the greatest challenges faced by managers? And how are these challenges being met by managers?

Evelyn Foo: So, we talked about opportunities, which is a double-edged sword because the flip side of it are the challenges. Fee compression is nothing new, but even more so now when I’m also seeing a little bit more of the do-it-yourself. These are the millennials that are getting into the marketplace. They really can’t afford advice in the traditional business model that you see. So, there’s pressure to decrease costs associated with the administration, compliance; the distribution costs are also part of it, and that’s part of the do-it-yourself component of it.

The other theme is the size in which to play, I call it, in the market. So, size does matter and the scale to be able to be in the marketplace because the costs are, for smaller folks, prohibitive for them. It’s the overhead to support the asset servicing and, therefore, I’m seeing definitely smaller firms that have to be more agile in offering their products or the partnerships that they have to align with.

You’ve also got changing client needs. So you’ve got to be able to offer products that are compelling to them. And then, the flip side of it is being able to quick to pivot to maintain those assets themselves.

Murray Bender: So finally, in your view, what does the future hold for the asset and wealth management business as we move into what is hopefully a post-pandemic environment?

Evelyn Foo: What I talked about earlier was digitization in the opportunities. There has to be a continual push to harness that technology, and I talked about fee compression. So the only way you’re going to be able to ensure that you’re going to be moving and pivoting is you’ve got to harness that technology to streamline your operations.

This also may mean too that you’re updating legacy systems. As you know, with large organizations, legacy systems were built a long time ago, and a lot of processes basically were built around them. So, you really need to take a look at them and say, okay, if I’m going to put the investment anyways, realistically, how much is that really going to cost? Because it’s not just new technology, it’s potentially looking at your legacy systems and saying, does that still work for you, or are you looking to overhaul that as well.

Also, the fact that you need to integrate with service providers that are out there. I call that straight-through processing to be able to ensure that you’re harnessing whatever links that they have as well.

Again, part of it also is that integration with service providers. This is where I’ve always felt that the business model is that you do what you’re great at doing and essentially make sure that you’re going through and looking at potential service providers that are out there. And there’s lots of quality that’s out there as well. But once you do that, it elevates your risk management oversight to be able to push to your key strengths and also harness their strengths and that being their specialty.

And finally, consolidation in the industry. I talked about the fee compression, I talked about the scale that you need to be in there. So firms without proprietary distribution, they will need to offer Cadillac servicing to advisors, product offerings that are diverse but also specialized as well, and they need to ensure that they maintain whatever assets that they have out there.

Murray Bender: Thanks for sharing your insights, Evelyn. We really appreciate your time today.

Evelyn Foo: It’s my pleasure, Murray.

Murray Bender: Today’s podcast has been brought to you by RBC Investor & Treasury Services, and we hope you found it useful. For additional insights on the future of asset and payment services, including our previous podcasts, visit I’m Murray Bender. Thanks for listening.

This content is provided for general information and does not constitute financial, tax, legal, or accounting advice and should not be relied upon in that regard. Neither RBC Investor & Treasury Services nor its affiliates accept any liability from loss or damage arising from use of the information in this podcast.