When investment management firms outsource components of their back office business functions, they should have certain expectations.
In absolute terms, it’s another line item in the budget nobody really wants to pay, but if the decision has been carefully considered, it’s usually worth the investment. Broadly, what should an outsourcing relationship accomplish?
- Improved efficiency,
- Better results, and
- Cost savings (either in pure economic terms, opportunity costs to the business, or both)
Numbers 1 and 3 can often be maximized purely through the inherent strengths of the product or service itself. If the software, for example, works as intended, it can speed the completion of laborious tasks and save a firm money as its employees can now focus more exclusively on their core areas of expertise.
But number 2 – Better Results - can only be optimized if the vendor offers a strong consulting component to the relationship.
What Should Investment Data Consulting Solve for Investment Managers?
Investment data consulting should help an investment manager to optimize their investment database strategy and better understand what it takes to succeed & help to define what success is to the manager.
A good consultant should be able to answer questions about a broad cross-section of the investment database industry, and incorporate those answers into an executable strategy. Questions may include:
- How does the database industry work and what does it mean for managers and their profiles?
- What makes for an attractive profile?
- How do database subscribers actually use the databases (and who are these subscribers, anyway)?
- In which databases should you publish, and why?
- Should a manager have separate strategies for each database?
- Do all data fields need to be completed? If no, why, and which ones must be filled out?
- What changes have occurred in a given database (or the industry) quarter-to-quarter?
A great consultant has the answers to all of these questions on hand, and should use them to help guide the topline investment database strategy.
The Case for Consulting
It’s important to understand that while investment data marketing isn’t new, its importance is growing by leaps and bounds every year.
Securities regulations mandate strong due diligence and fiduciary responsibility for plan administrators and investors of all stripes. These regulations have severely weakened the traditional investment management marketing & sales relationship: personal relationships, golf, and martini lunches no longer rule the day.
Now, investment data is what drives the process; interesting, relevant data that is found in the database search process is what helps to establish the relationship.
It should not be surprising to learn, then, that there’s a lot of nuance in investment database marketing, and that much of that nuance is rooted in the rapidly-evolving nature of the database industry itself.
For example:
- Most of the data that’s needed for RFPs are already in the databases, and as databases continue to grow, we believe the RFP industry will merge with the databases.
- Initial, essential due diligence occurs primarily in the databases…TODAY.
- There are 9 true datasets that managers need to populate and update regularly across each of their database profiles.
- If you have partial profiles in some databases, full profiles in others, it signals to database subscribers that your firm isn’t fully committed (or doesn’t understand) to doing what it takes to maintain a professional strategy. Consistency is essential.
- Investment data itself is coming under increased scrutiny by the SEC (we did a whole webinar and a series of posts on the topic of investment data compliance). As the agency formalizes its final advertising rules (the draft can be found here), investment data that is SEC-compliant will become mandatory.
Understanding the “inside baseball”-nature of these sorts of industry fundamentals helps consultants to better assist clients in understanding what a well-executed, compliant investment database strategy can accomplish, as well as manage expectations for success.
APX Stream Consulting: A Case Study
Our experience is a case study for the importance of the consulting relationship.
Our firm exists because investment managers don’t have either the resources, interest, wherewithal, or expertise to spend 10 years writing code, testing software, and doing the hard work of establishing relationships with investment database companies across the globe.
We’ve done all that.
But prior (and in addition) to the technical expertise, we are investment industry salespeople, marketers, content creators, and business operations experts. It’s a broad and deep wellspring of experience that we bring to bear on how we think about the value our products and services.
Importantly, we are not software salespeople, and we don’t look at the Data Vault as a discrete product offering.
It is part of an integrated data marketing solution that enables managers to seamlessly manage and distribute their data so they can then focus on leveraging that data to grow their visibility in the marketplace, establish relationships, and grow AUM.
But none of that happens simply as a result of using the Data Vault.
It requires an understanding, not only of how the vault works, but of how investment data, writ large, is coming to dominate the search and assess process; how managers need to take that truth and incorporate it into their existing topline sales and marketing strategy.
All of these things are in our wheelhouse. And it’s included in our base pricing to clients, because, as we noted earlier, one without the other isn’t a recipe for successful investment data marketing.
In sum…
Any good carpenter will tell you that all the expensive tools in the world can’t save poor craftsmen from themselves. It’s the same with investment data marketing.
An outsourced investment data management and marketing partner should be able to answer any and all questions, as well as proactively teach their clients about how databases work, the people who rely on them for their livelihoods, and how best to leverage them to grow AUM.