It's a significant year for mergers and acquisitions as asset managers take aggressive measures to survive. According to Institutional Investor, the first quarter of the year alone saw $12.2 billion in deals, representing the highest amount spent on M&A activity in the last two years.

John Toepfer
Synthesis Technology
President, CEO

With the increase in M&A activity, there are more firms operating in a multi-boutique environment. A multi-boutique investment firm has unique operational challenges compared to that of firms operating primarily in a proprietary investment vehicle space. This leads to challenges with information flow, systems, compliance, data and branding at all levels.

A proprietary investment strategy firm, even one working with subadvisors, is able to treat their products and information as if they are all under one roof. Conversely, a multi-boutique firm must simultaneously honor their internal brand as well as maintain and promote those of the sub-brand or boutique firm. Each boutique must maintain a degree of autonomy; this stretches from their brand down to their data. But if the goal is to preserve and support that autonomy, how does the multi-boutique firm support efficient centralized marketing operations?

Data Challenges in Multi-Boutique Firms

The answer begins with a strong solution supporting data aggregation from all the related firms. For the parent firm to have an efficient and risk-managed content creation process, they must be able to collect quality data in a reliable and timely manner from each boutique. This challenge can be surprisingly daunting. The boutiques are often not staffed or interested in overhauling their data processes, and the unique nature of their products may make the data itself difficult for the parent firm to normalize into their data warehouses. This problem is felt most severely in marketing operations groups where the staff must deal with delays and anomalous data while still getting quality literature produced on time. The consistency of the data flow is more important in this scenario than its form or format. Ideally, the source data can be collected in any format and turned into a clean reporting-focused data warehouse, which can reliably be used to support any client- facing communication.

The goal is to create a repeatable process for data collection and integration that doesn't place demands on the people or infrastructure at the boutiques or stress on the operations teams at the parent company. This is where following the basic disciplines of data governance become important. The success of the system requires a good process and accountability for each data point.

Once there's a repeatable process for data delivery, there needs to be an automated way to test the data against norms, expectations and historical behaviors. A solid data warehousing strategy will support plug-in points for both standard and customized data validations, plus stewardship and governance functions so that the right people are notified of warnings or exceptions. Having a data aggregation process model that embraces diverse data inputs, data validation and data quality reporting all at once is absolutely gold from a risk management and compliance perspective. It will also have a substantial ROI.

Compliance Concerns

As with the data problem, the compliance concerns of rolling up or re-marketing separate products from semi-autonomous entities can be very challenging. Cathy Vasilev, founding member and senior vice president at Red Oak Compliance, said implementing automation, integrating complementary systems and developing a risk-based model are a few key ways to improve efficiency and risk management in any scenario. But for a multi-boutique, these issues become even more important.

"Most firms today operate in a multi-boutique environment, so workflows can be complex. The more integration points you can create within your organization, the better off you'll be. The idea is to get information available at your fingertips and put a highly controlled process in place," she said.

What often holds things up, Vasilev explained, is the back and forth dance between the parent organization, subject matter experts and compliance at the boutique.

"They're always waiting on each other for something. The parent organization is waiting for compliance and legal, and compliance and legal are waiting for the parent company to send final copies for books and records. In an automated world, you can review things in parallel, so compliance, legal, and other subject matter experts should all be able to go into the system and review it at the same time, eliminating the need for sequential review cycles," she said.

Vasilev also noted that many firms have gone to a risk-based model, which she is a big proponent of.

"Many firms are ranking the material they're producing as low, medium, or high risk and then putting that material through the appropriate streamlined workflow. A low risk model example might be if you're creating a pitch deck from approved slides, you could allow salespeople to mix and match slides or include pre-approved modules without having to go through another compliance review. Medium risk might have one more step in the workflow and high risk material always has to go through the entire process where it will have multiple layers of approval including, subject matter experts like legal or product specialists, or CFA's if the material includes performance numbers," said Vasilev.

She recommends firms have an audit team on the back end to monitor activity and a training program to ensure everyone is well-trained on the process. It's truly much easier on everyone and communication materials get to market faster.

Branding & Messaging

If the data and compliance issues are well-handled, the bottlenecks that gate the success and efficiency of the marketing team�s operations largely go away. However, if the firm can't get on the same page about branding and messaging, the efforts to streamline data and compliance issues can only go so far.

More often than not, boutiques don't want to lose their brand, and they don't want to change their story. While the parent firm looks to standardize the brand and messaging, boutiques can be adamant about keeping their messaging the same way they've done it for years. This causes the boutiques and the parent firm to clash on brand priorities. The problem gets larger as boutiques become more involved. If there are ten boutiques, and they all want to do their own marketing, the organization can't be successful until they've come to a consensus.

The key to overcoming this challenge lies in the executive suite. At some point, the executive teams must recognize the collective operational success of the firm is a key part of the financial success of the relationships. Executives must support collective decision making and let go of preserving the status quo. Frankly, the survival of the firm depends on it.

Organizing the Chaos

As the industry continues to consolidate, multi-boutique firms will face challenges with data, compliance and branding concerns. Firms who can get their act together will be able to reap the benefits of their strategic M&A moves. The key to success lies in the execution, and time is of the essence.

"There is more pressure to perform than any time in the last fifteen years," says Andrew Corn, marketing consultant and CEO of E5A Integrated Marketing in NYC. "The pressure on fees increases the need for brand recognition and consistency. To really compete, asset managers need speed to market, absolute accuracy and the ability to distribute their information in any medium," he said.

John Toepfer is founder and CEO of Synthesis. He is a technology entrepreneur and investor with 30 years of experience developing and deploying document automation and communication solutions for investment companies.

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