Reimagining the enterprise value proposition: Strategies for asset managers

In today's competitive landscape, the concept of an enterprise’s value proposition has never been more critical. It encapsulates the unique value a company offers to its customers, stakeholders, and the broader market. A well-defined value proposition is essential for establishing a strong market position, especially in the crowded asset management marketplace, where investment management firms must effectively communicate why clients should choose their company and strategies over others.

For asset managers operating in a dynamic environment like Luxembourg – the world's second-largest investment fund hub – a distinct enterprise value proposition is not just beneficial; it is imperative. While these firms reap the advantages of setting up and managing their funds in the leading domicile for cross-border fund distribution, they also encounter unique challenges that require a fresh and continuously reviewed approach to their value proposition.

This article explores three key areas where asset managers ready to reimagine their enterprise value proposition can focus their efforts: brand identity, enterprise resiliency management, and talent management.

A differentiated brand identity: the key to strong market positioning

A strong brand is fundamental for long-term success, and this is no less true for the asset management sector. Global trends such as rapid technological advancements and changing client demographics and preferences continue to reshape the industry, driving market consolidation and increasing competition. Now more than ever, asset managers must ensure their brand identity is aligned with their target market position, implementing a coherent strategy that combines unique products, services, and channels to remain relevant for the current and future generations.

While their brand identity may be largely driven by the global strategy, asset managers domiciled in Luxembourg should embrace opportunities to differentiate and adapt their strategies to this country’s target market i.e., the world. To build a compelling brand, they can consider three main differentiation strategies.

Product differentiation: Unique features or attributes can give companies a competitive edge, setting them apart in a crowded marketplace. For instance, one of the world’s largest global investment managers launched the first fully tokenized UCITS product domiciled in Luxembourg, built on a public blockchain.  This is an example of product differentiation, as the firm seeks to distinguish itself as a leader in providing innovative solutions in Europe and abroad.

Service differentiation: As competition intensifies, firms must differentiate their services to stand out from other providers and cultivate loyal customer bases. On top of beating the markets, focusing on an exceptional customer experience, through highly qualitative personalized services for example, is one way brands can succeed. To make this possible, data plays a crucial role as firms with clean, integrated datasets can easily tailor communications, portfolio construction, and service delivery.

Channel differentiation: Unique platforms and innovative distribution methods can reinforce brand identity and help firms stand out from the competition. Client-facing platforms, for example, offer real-time performance tracking, self-service options, and secure digital communication – essential for the next generation of investors.

Social media, in particular, has emerged as a transformative force in terms of channel strategy. According to a study published by SEI,  social media networks are now critical communications channels and sources of real-time data for investment managers. While compliance concerns, reputational risk and resource constraints may have historically hindered asset managers’ engagement on social platforms, firms can no longer ignore the significant potential that lies therein. Marketing is the most frequent application, with asset management firms of all types relying on social networks to distribute content, connect with investors, and build their brands. Additionally, the integration of social media into the investment process itself, usually as a source of sentiment data, has begun to gain traction. The concept of social investing, where social networks double as trading platforms, is the most recent innovation in this space. Looking ahead, we can envisage a future where social media is intricately woven into asset managers’ business models, connecting investors, products, and clients through real-time platforms.

Build resilience in elaborating enterprise risk management and adapting to regulatory changes

Today’s volatile business environment has revealed vulnerabilities in existing risk management frameworks and highlighted challenges in regulatory change management. To thrive amid continual disruption, asset managers should adopt a holistic approach to risk management that emphasizes enterprise-level strategic resiliency. This requires a fundamental shift in mindset, aligning processes, resources, governance, and culture.

According to the World Economic Forum,  the resilience of an organization is based on its people, who form the foundation of its response before, during and after a crisis. The development of organizational resilience is an area in which business leaders can play a substantial and impactful role. Furthermore, the pioneering role of asset managers and insurers in risk management positions the sector as a central stakeholder in resilience efforts.

What strategies do we recommend for managing risk and regulatory challenges?

Proactive compliance and risk management frameworks: To effectively manage regulatory challenges, asset managers must adopt proactive compliance and risk management frameworks. This involves staying informed of regulatory changes, conducting regular compliance assessments, and implementing robust internal controls. By fostering a culture of compliance, firms can mitigate regulatory risk and enhance their reputation in the market. In this context, it is essential that employees are knowledgeable and regularly trained on the European and Luxembourg regulations impacting investment fund managers.

Leveraging data analytics: Where data was once primarily used for compliance and reporting, it is now a critical lever for performance and plays a crucial role in risk management. By harnessing advanced analytics and new technologies, asset managers can improve their risk assessment processes, uncover hidden risks, improve market trend prediction, and fine-tune strategies across asset classes. However, to fully realize these benefits, firms must invest in training to empower their people with the necessary skills and knowledge.

Furthermore, embedding risk management into the strategic planning process is crucial for effective enterprise risk management. Through the use of appropriate tools and frameworks, firms can align their risk appetite with their business objectives, ensuring that risk considerations are integral to decision-making.

Asset managers can also identify and capitalize on opportunities that arise from changing regulations. For example, DORA (Digital Operational Resilience Act), requires organizations to reconsider how they manage third-party providers, internal systems, and incident response protocols. This regulation is pushing financial services companies to implement integrated, stress-tested digital operations. By proactively engaging or even lobbying with regulators to understand and mitigate the implications of expected regulatory changes, firms can position themselves to leverage these opportunities for growth.

Rethink talent management to harness the potential of the current and future workforce

In asset management, the redefinition of skills and expectations from employees has become increasingly evident. The profiles of today's workforce differ significantly from those of the past, reflecting a clear upskilling trend across the value chain. As firms adapt to rapid regulatory changes, technological advancements and evolving market demands, employees are expected to possess a more diverse skill set apart from traditional financial acumen. This shift requires a commitment to continuous learning and development, ensuring that employees are equipped to navigate the complexities of the modern investment landscape and contribute effectively to their organization’s success.

Firms should therefore prioritize the development of effective upskilling and reskilling strategies, training programs and workshops tailored to their employees’ needs. As mentioned earlier, these programs should cover a range of topics, including data analytics, risk management, regulatory compliance, and technology evolutions such as GenAI. The speed of adoption of GenAI has brought important workforce questions to the fore, related to technology and skills investments, capability, organizational culture and risk. However, it remains true that employees’ role in mastering and monitoring the use of these new technologies is still essential.

Today’s workforce considers whether an employer has a healthy organizational culture, and if they enable new ways of working. Flexible working schedules, including the possibility of working remotely, have become a baseline for many knowledge workers, with employees now looking at the office more as a shared space for teaming. Employers should also create a thoughtful approach by leveraging mobility teams to enable work location flexibility while still focusing on an exceptional client experience, being mindful as well of tax, legal and compliance considerations.

Moreover, the ability to strategically attract and retain talent is an important measure of an organization's talent health. To retain top talent, organizations must understand the needs and motivations of their employees, while keeping in mind that the overall strategy and conduct of the business remains in the management’s remit. Conducting regular surveys and feedback sessions can provide valuable insights into employee satisfaction, career aspirations, and areas for improvement. By actively listening to employees and addressing their concerns, firms can create a supportive work environment that fosters loyalty and commitment. In addition, leaders should develop robust workforce planning, hiring and talent management tools to integrate market data for hiring and retention strategy. 

Conclusion: Asset managers must equip their business for the future

In this transformational era, asset managers can create a competitive advantage by reimagining key tenants of their enterprise value proposition. By focusing on brand differentiation, building resilience in risk management, and rethinking talent strategies, asset managers can proactively address the biggest challenges facing the industry today, while ensuring their resilience for tomorrow.