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Chris Newlands
Nordic investors care little about cost reduction and improving client service when it comes to their middle and back office operations and more about reducing operational risk, according to the findings of a Bank of New York Mellon white paper.
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Sid Newby |
The paper, which will be published in full at the end of May, asked senior operating officers from 25 of the top 35 Nordic pension and insurance funds to outline concerns for their back and middle office operations. As a result, 48 per cent of respondents ranked the reduction of operational risk as their number one priority, while a third ranked it as their number two priority.
The report meanwhile found that cost reduction, improving client service and generating additional revenues was far less of a concern. “It is very interesting that cost, usually cited as the most important factor when it comes to asset servicing, was ranked much lower down than the reduction of operational risk,” Sid Newby, head of Nordic business development at BNY Mellon, told nrpn. “What that tells me is that if providers give clients what they want they would be willing to pay for it.”
Almost a third of respondents also ranked the support of new products and instrument risk as their number one area of concern, while another 25 per cent ranked it as their number two priority. Respondents highlighted problems associated with attracting and retaining staff to deal with those new products as a particular worry.
At the same time, the BNY Mellon paper found that, despite the focus on addressing the technology challenge through automation, significant differences existed between groups, with many funds underestimating a need for improvement.
“The immediate reaction from respondents was that they were very good in this area but they do not seem to appreciate that a lot more could be done,” said Mr Newby. “People’s perception of automation is very different from reality.”
The white paper also looked at issues such as attracting and retaining staff and while this was a number one challenge to achieving operational priorities in Sweden, only two organisations ranked this as a number one concern in Denmark.
BNY Mellon commissioned McKinsey & Company to interview the 25 pensions and insurance funds, of which 40 per cent hailed from Sweden, 36 per cent from Denmark, 16 per cent from Finland and 8 per cent from Norway. Almost 40 per cent of the funds interviewed, which included the likes of ATP and Ilmarinen, have assets under management of between €20bn to €30bn. Sixteen per cent have assets of less than €10bn.
