You're Unsure If What Your Firm Faces is a Choice or a Mandate, but the Pressure to do Something is Increasing

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For many firms, investment management is a cultural orientation akin to stewardship. This is particularly true in banks. For decades, trust officers have viewed a portfolio as something to nurture for a client-family’s long-term benefit. Introducing outside investment strategies “Open Architecture” represents a cultural shift away from financial resource creation to financial resource management. 

From a business standpoint, resource management is eminently more controllable than resource creation. Think of it this way:  the ability to create wealth has measures of internal skill and external capital market conditions; you can possibly control the skill, but you are at the mercy of the conditions. However, resource management is 100% skill defined by the process and delivered through diligence, both of which are under the organization’s control.

Outsourced investment management is a viable option with increasing market acceptance. Making the move to outsourcing is not something to be taken lightly, especially for larger firms in which the history and culture were built on investment analysis and portfolio management.  Taking stock of the fears and opportunities surrounding a move to outsource is best done with an outside consultant, given the risk that a lack of candor with senior management on sensitive topics will distort real feelings or positions. These honest discussions serve as essential raw material for a viable business plan. (See the blog listing, “Outsourcing Investment Management: Enhance to Advance” for a discussion on the business and cultural issues at hand with a move from internal to external investment management.)

  • How oriented is your culture around stock picking and research?
  • If you were an outside investor, would you invest in your current business model?
  • Where will you get new clients to grow your business?
  • What are your strengths and weaknesses compared to the different advisor types?