Sep 19, 2023

Ideally, your firm’s staff should be able to quickly pull up a current and comprehensive list of the products offered by your organization. If this isn’t taking place, there’s a good chance that your staff members hold differing views on what constitutes your firm’s products.

What Is a Product?

A typical product is anything your firm sells in the marketplace that:

  • an intended investment strategy
  • Gets managed by a specialized investment team
  • Applies to a specific investment vehicle

Products come in both pooled and individualized varieties. With pooled products, investment strategies are offered through structures like a mutual fund, trust, or exchange-traded fund (ETF), where investors who own shares all receive equal treatment. Individualized products are tailored to institutional and high-net-worth clients, often in the form of separately managed accounts. While a specific investment strategy is pitched, clients of individualized products are granted some degree of customization, which is outlined in the IMA (Investment Management Agreement).

Today, many organizations find themselves offering products in both worlds – which can create chaos if you do not take a thoughtful approach to defining your products.

What Are Solutions and Services?

Solutions and services have become increasingly common in organizations. A firm will often include them in its full suite of investment offerings ─ and some may even classify them as products. A solution combines multiple products bundled together to meet an intended investor’s outcome. Target date retirement funds comprise a mix of different products with allocations that automatically rebalance over time to meet an individual investor’s objectives. Asset managers also offer model portfolios, another type of solution, that provide a framework for asset allocation, fund/security selection, diversification, rebalancing, and flexibility across a broad range of risk/return profiles. Think of services as a tool, utility, or duty offered to investors that may or may not carry a fee. Examples of services include financial planning, trustee services, and tools that help clients select fund offerings for a 401(k) plan.

Firms often get hung up in the area where investment strategies and products intersect. Accordingly, many firms view “investment strategy” as an attribute that influences (or is a component of) the product. Although it’s an unconventional approach, some firms have the opposite view where “product” is an attribute that influences (or is a component of) the strategy. Whatever your firm decides will have future implications for business agility and the level of ease with querying the data.

What Is Product Reference Data?

Understanding and agreeing on what constitutes a product to be listed as an offering by your organization is where you should start, but it’s not the be-all and end-all. You need a way to explain, describe, compare, and contrast each of these products individually and vis-á-vis your competitors and peers.

Information captured as data attributes that describe and explain each of those products, product reference data isn’t purchased like market data, and it does not use industry standard terminologies like security reference data. Product reference data gets generated within your organization, and the data is not expected to change often, if at all. Coming to mutually agreed-upon terminology across the organization for this data enables a common explanation of a product. Defining this custom reference data can distinguish important characteristics and key differentiators of each product that your firm wants to emphasize to your audience.

If your firm offers a dozen (or fewer) products, you can get away with cramming enough information into the product’s name to explain to your audience what it is and how it differs from other products. But most organizations want to highlight the broad range and uniqueness of their offerings, which often can run into the hundreds of products. Firms that attempt to pack all that information into a lengthy and verbose product name may fail to grab a potential investor’s attention.

If individuals are tasked with explaining products via spoken conversations or in writing as part of the sales process, and your organization has failed to properly structure product reference data terminology, you might wind up with multiple interpretations and renditions of terms for the same product. This can easily lead to an incorrect representation of the product, a situation that could arise unknowingly. Organizations require a crisp, consistent, and precise “elevator pitch” for each of their products, and this reference data sets the stage for achieving that.

You may wonder whether the numerical data that informs your audience regarding how the product is performing against a benchmark or peers, such as performance returns or assets under management (AUM)? Although this is technically product data, it is characterized as investment data, and not reference data. Investment data is dynamic, frequently changing data that’s essential to present results for a given product. And completing that seamless link between the product and its investment data requires appropriate identification. Identifier data attributes are handled under the product reference data umbrella, and of they are not properly defined and applied, you’ll find it exceedingly difficult to synchronize product reference data with investment data and other data sets for all your products.

To maximize your organization’s value of managing all this information, it’s important that the reference data that describes your products have relational ties to other reference, investment, and peer comparison data sets. For instance, establishing clarity around who represents the investment decision-making authority requires internal or external employees (and their reference data) to have a defined relationship to a product. Similarly, understanding a product’s benchmarks to compare results versus an index or peer comparison entity also requires a relationship from the benchmark to a product.

Wrapping Up the Discussion

A properly designed product reference data model provides an organized yet flexible blueprint for product reference data characteristics and a product’s ties to additional data, allowing the data to be consistently maintained over time. A product reference data master (product master) is often then used as the central structure where the data resides and can be consumed and distributed downstream to wherever it’s needed in the organization.

Cutter Can Help.

Is your firm is experiencing challenges devising a comprehensive list of product offerings? Want to learn more about product reference data, product masters, or how to apply product reference data to a tailored product reference data model to meet your organization’s specific needs?

Read our whitepaper Implementing a Product Master? Here Are 8 Best Practices to Consider Before Getting Started.

To speak with a Cutter consultant, reach out directly at [email protected].