Is your fleet ready?

An asset manager’s product range review is crucial to ensure that all products are aligned with the company’s strategy, its profitability targets, its marketing objectives, and are optimal from a risk-management perspective (operational, regulatory, reputational, and ESG). In this article, we outline the issues covered by a product range review and outline the benefits you can gain from the exercise, the issues to watch out for, and how to deal with them. Finally, we discuss when you should undertake such a project. A product range review is a challenging exercise but it can pay big dividends. It answers the questions: Is your product fleet ship-shape, organised and attractive to those who want to travel with you? Can it carry that traffic reliably and profitably?

A multi-faceted exercise

The review of a product range can cover a wide spectrum of issues: Which funds should be retained? Which should have different objectives? Which should be merged with another vehicle? Should the names be changed? What is the rationale behind these names? Is a change of jurisdiction relevant? Should share classes be created or removed? Should fees be adjusted? Does the range look like a fleet organised for safe travel or just a collection of random vehicles?

It can be a complex project because it goes to the heart of your business: the scope can be huge and you can get lost in the process by trying to cover too many issues. It is important to define the strategic objective of a product range review from the outset. This could be commercial, economic, operational, or focused on improved risk management. To be truly thorough, it should cover all these factors but the expectations in each of these areas must be defined initially, otherwise you run the risk of embarking on a sprawling project with an uncertain outcome. Your desired destination will help to chart the course.

A host of benefits

Your fund range needs to be easy to read and should say something meaningful about each product. It’s not a question of aesthetics – with few exceptions, no one will buy a range from you. It’s a question of the confidence of the person marketing the fund to the investor. A client adviser who understands how the products are structured is a confident adviser, and therefore a more successful one. Above all, an adviser who sells smarter reduces the risk of mis-selling (i.e. selling a product that is not suited to the investor or his circumstances). As a result, you build client loyalty and protect yourself from certain regulatory risks.

The automotive industry understands this very well. BMW is an excellent example. Its range of models extends from the 1 Series – the city car – to the 7 Series – the large, luxurious limousine – with i for petrol engines, d for diesel, e for electric, x for SUV. Each model has its place in the range and every buyer knows immediately where it fits. Is your range of funds just as easy to understand?

A product range review can lead to a ‘refreshed’ offering that is easier to understand, better aligned with market demand, more in line with your core investment expertise, and more likely to make your downstream advisers stronger advocates for your funds.

Finally, after a range review, you can improve your economic profile and your operational risk as your offering is better aligned with both commercial realities and your strategy. Just the right number of funds and share classes. No more, no less!

Things to consider

A range review is a complex exercise, and it involves many people across the firm. Debates can become emotional: there are always good reasons why a fund was launched, but are they still relevant today? Sometimes difficult choices have to be made, such as discontinuing a product, but they are necessary decisions: we all have to allocate scarce resources in a highly competitive market, and the status quo is not always the best way forward.

We recommend two approaches to managing this complexity. The first is to build a documented and structured information base (interviews with internal stakeholders, interviews with customers, analysis of competing offerings, performance, changes in assets relative to the market, trade flows, etc.). Objective, comparable facts provide the confidence to make sound decisions. Secondly, we use co-creation workshops that bring together the relevant stakeholders across the company. This stimulates creativity, involves them in the decisions, lets them understand what motivates them and how the range review will strengthen the business. The range review is not seen as a fait accompli. It creates a circle of active ambassadors who explain the process and its results in an educational way to their colleagues, thereby gaining the support of your teams.

The other difficulty is to assess long-term commercial demand. Reviewing your product range is indeed an intensive exercise; you need to enjoy its fruits for many years to come. Understanding investors’ long-term needs is as much an art as a science. You must have the clarity and honesty to aim to be right most of the time. It is impossible to be right all of the time, but being generally right is much better than being exactly wrong. A tactical, recurring approach to the range complements the in-depth strategic review. In fact, it is desirable, as an overly rigid approach can stifle decision-making and lead to missed opportunities.

Is this the right time?

The answer to that question is either ‘always’ or ‘never’!

A product range review is a healthy practice with many benefits, so it’s always the right time. It’s also a demanding exercise, and the pressures of everyday life can make us put it off. In our experience, we often work with our clients on these issues at pivotal points in their business lives: modifications to the types of customers they target, new ESG orientations, changes in senior management and, of course, mergers with other companies.

Beyond these exceptional circumstances, we are all at a key market moment that should prompt some reflection: after fifteen years of near-zero interest rates, is your product range adapted to the new environment?

So, is your fleet ready?

I would be delighted to discuss this with you. Don’t hesitate to contact me at jfhirschel@h-ideas.ch or +41 22 561 8412