The Evolution of the Mandate: The Solutions Revolution

Institutional investors are asking more of their asset managers. While performance matters as much as ever and there will always be demand for quality alpha, investors are increasingly seeking more than just products; they are looking for managers to serve as trusted advisors, providing them with a broader array of investment solutions.

The concerted efforts by many of the world’s largest and most successful asset managers to build these capabilities are a testament to the permanence of this trend. Those firms that fail to adapt risk being marginalized.

But what exactly does providing investors with “solutions” mean and what specifically is required to be effective?  This paper, The Evolution of the Mandate: The Solutions Revolution, attempts to answer that question and identifies a series of fundamental questions firms need to answer when building out their solutions capabilities:

  1. Overall proposition: How should the offering balance “product” and “advice” components?
  2. Scalability vs. customization: How should the demand for customization be balanced with the need for scalability?
  3. Organization and staffing model: How should the organizational model be structured and staffed?
  4. Revenue model and incentive structures: How should clients pay for the services/products and how should that influence incentives and compensation?
  5. Managing conflicts: How should potential conflicts that arise between mandates and the nature of advice provided be managed?

Many managers have made meaningful efforts to build out and formalize their solutions capabilities over the last several years, so for them, it is an opportune time to step back and assess progress and the plan going forward. For others in earlier stages, we suggest a course of action that recognizes the need for rapid progress while carefully considering numerous challenges, from understanding the economic model, to determining how to best source the capabilities required, to differentiating the offering in an increasingly crowded space.  

Joshua Zwick – Partner in the Americas Wealth & Asset Management Practice
Nikki Lugo – Consultant

The Evolution of the Mandate: The Solutions Revolution