Digital transformation is a priority for most chief operating officers in financial services, especially in asset management. That’s the not-so-surprising result of a survey of 250 global COOs in financial services conducted by BNP Paribas Securities Services.
But leave it to a bank to not consider asking some of the most important questions – and thereby miss some of the potential solutions to firms’ challenges.
The survey found a hunger to drive change and transformation, with technology at the forefront of this. Fine. But the survey’s assumptions were steeped in traditional, proprietary, build-it-yourself thinking. There were no questions about open source software. Or outsourcing to (or challenges from) platform and -as-a-service type models. Nothing about open data or open APIs, and what they imply for COOs. DevOps and agile? Nope. And nowhere a question about collaborating with or learning from fintechs.
This isn’t about technology. It’s about culture, skills, mindset, adaptability. It’s about change and transformation. Yet this survey, which makes clear COOs see their biggest mission as business transformation, doesn’t go there.
The survey does have some interesting findings. It’s useful in the context of the questions it does ask.
Asset management appears to the be sharp end of the trend. The survey finds asset managers are keenest to change – change how they work, how they fit into the organization, and how they use technology.
This may reflect greater pressures on buy sides, which are smaller than banks, much more diverse, and lack the blockbuster tech budgets of big banks and insurance companies.
BNP Paribas’s survey found 63% of asset manager COOs cited increased competition in the market as their biggest challenge. Buy-side COOs are more likely than counterparts elsewhere to be involved in delivering change projects. Asset owners are also engaged in similar activities.
Don’t call me COO
And they are the biggest portion of COOs that want to change their title to “chief change officer”. According to BNP Paribas, asset manager COOs see themselves in the driving seat. They are keen therefore to get involved in technology collaborations (although this was defined by working better with internal departments).
This may also reflect buy side COOs’ own experiences: about one-third of buy-side COOs come from tech or I.T. backgrounds, whereas more bank, insurance and broker COO careers began in finance or accounting.
COO’s need to become more tech-savvyJeroen Buwalda, Eastspring
But this also leaves buy sides overwhelmed at the scale of the challenge. Asset managers face the rise of passive investing, new compliance requirements, and the changing needs of younger investors: 51% cited changing client needs as a key challenge, versus only 43% of sell-side COOs. But in qualitative follow-up interviews, asset manager COOs say there is “only so much they can do”, according to BNP Paribas.
Most COOs cited spending more time with clients as one way to drive change. And that makes sense. But is that really the best way to go about this? Could the survey had shed some light on more practical, day-to-day realities?
For example, it could have asked: what are your KPIs? How do you get rewarded? How do your attempts at change get measured? Are you on a strict bean-counting RoI regime? Are you fighting to get a project in your regulator’s sandbox, to test and learn, to make a few mistakes?
COOs may not want any of this. Easier to meet traditional benchmarks, cash the bonus check, and kick the can down the road. It’s only human. But given all of the challenges the industry faces, maybe spending more time with shareholders should have also been on the agenda.
More urgent in Asia
For what it’s worth, the other source of urgency for change that BNP Paribas finds is among COOs in Asia. More than half of Asia-based COOs said transformation or change projects are their top priority – versus only 26% of COOs in North America.
The survey cited Jeroen Buwalda, COO at Eastspring Investments, saying of Asia “organizations are growing much faster, they need to support new strategies at a rapid pace and ensure there is enough product on the shelf to capture the market opportunity.”
My successor won’t necessarily be someone who has run a big team of peopleSimon Olenka, BNP Paribas Securities Services
DigFin is based in Asia, so this is music to our ears. But for global firms, Asia is often the afterthought. U.S. firms are known to centralize all operating and tech strategy in New York. European firms are more decentralized in their decision-making, but Asia is still usually the taker, not the maker, of strategy.
This is not a criticism of the survey. It’s a reminder of why matters in Asia may feel more urgent. But for those who haven’t been paying attention, the pendulum has swung, particularly when it comes to digital finance. Asian clients are increasing shaping demand, how asset managers and others design product, and how they address new operational challenges, particularly in the digital sphere.
The COO of the future
Take some of these comments from survey participants.
“My successor won’t necessarily come from the traditional routes of someone who has run a big team of people,” said Simon Olenka, head of client delivery U.K. at BNP Paribas Securities Services.
“I think the future COO needs to be somebody who is very I.T. or very business-oriented,” as oppose to a finance or accounting person, said Alain Pochet, head of client delivery, BNP Paribas Securities Services.
But most COOs agree their successors will still come from within financial services: only 14% surveyed said otherwise. So transformation has to come from within the firm. What factors will make finance COOs successful?
Adapting to compliance needs is one factor. “Where do I see my successor coming from?” asked Simon Rafferty, COO at Winterflood Securities. “I think it’s a combination of people management, regulatory knowledge and interest, and an interest in technology.”
“Our business is constantly evolving in terms of new technologies, products, and regulations, and it would be impossible to stay in the role of COO for the next five to 10 years and not adapt to that,” said Kate Straker, COO at Man AHL.
But the tech angle is likely to have the greatest prominence. “I think COOs need to become more tech savvy,” said Buwalda. “I can well imagine someone with a technology or transformation background coming into operations.”
Here are other findings from the survey:
- COOs want a rebrand, with 60% saying their job title is no longer relevant; the most popular alternative is chief strategy officer (38%) followed by chief transformation officer (25%) and chief change officer (17%).
- The role is no longer purely operational: 80% of COOs surveyed have two or more functions reporting to them.
- Upskilling the workforce will become the top priority for 67% of COOs.
- The vast majority of COOs (79%) want closer collaboration with other functions, especially I.T. and technology departments.
- 60% of COOs believe spending time with clients will become key to driving growth and transformation.