Feb 19, 2021

Overview

The client, which has delivered strong returns and dramatically increased its membership in the past decade, manages over AUD 100 billion across an increasingly complex range of investment options, portfolios, and asset classes.

As part of its plans to reach AUD 200 billion, and with a commitment to insourcing investment activity, the firm is reconsidering its operating model. The client has specific questions about which systems, data, and operational processes are best served by its custodian and which would be best served internally.

To develop a shared vision of the future, the client and custodian have asked Cutter Associates for a project approach to determine a best practices-based operating model that would achieve the following:

  • Operational efficiency and eliminating duplication of efforts between the custodian and internal teams
  • Support improved asset management effectiveness, scalability, and agility
  • Enable the firm’s growth strategy for years to come

The firm sought Cutter’s assistance to come up with a future state operating model based on leading industry practices and consistent with the strengths and weaknesses of the client and custodian.

Cutter Solution

Cutter worked with the firm on the following:

  • Met with project stakeholders to understand the current processes and pain points in the operating environment.
  • Worked with the custodian to understand its perspectives on the current state, discuss operational inefficiencies in service usage, and identify capabilities not currently used, including capabilities targeted in the custodian’s roadmap.
  • Provided our client with preferred industry practices and governing principles related to outsourcing.
  • Conducted a current state assessment of the different functions in scope, placing emphasis on services within the scope of the custodian’s capabilities.
  • Worked with the firm and custodian to develop specific recommendations for operating model improvements based on the current state assessment findings and our view of the best practice operating model.
  • Outlined functions/areas where the custodian’s services are appropriate and align with leading industry practices.
  • Designed a high-level workflow for certain services and outlined data management and vendor oversight recommendations.
  • Provided a prioritized set of initiatives for the client and the custodian to more effectively utilize the recommended services.
  • Provided guiding principles on the use of other vendor solutions that would be more consistent with the strategy of leveraging more of the custodian’s services.

Over the years, the firm had requested the custodian for additional services, and were generally accommodated. At times, however, the services did not align within the normal scope of offerings, which resulted in suboptimal solutions and inefficiencies in some areas.

As a result of the Cutter engagement, the following was achieved:

  • Client got a clear picture of which services aligned with leading industry practices and were a natural fit for the custodian to undertake.
  • The custodian developed greater clarity on areas that it needs to invest in to better service the client (and other clients with similar requirements).
  • Client received specific recommendations in certain areas of investment processing for solutions that fell outside the custodian’s scope.