Meagen Burnett, COO of Prudential Investment Managers outlines her vision for the South African asset management industry, shares her proudest achievement since joining the firm and discusses the potential of AI and machine learning for improved data analytics.
You’ve been with Prudential for 7 years now. What is the one thing you’ve implemented during that period that you are most proud of?
The thing I’m most proud of is creating a sustainable, efficient, scalable investment operating platform that is supported by a talented team.
When I joined Prudential, we had a very fragmented architecture and our technology and business process were not necessarily scalable or integrated. Our architecture and processes have now been built into something that can scale and flex with business growth needs. In an investment-led business, Technology and Operations capacity should be seamless and never inhibit business potential.
In addition to growing the platform we’ve also built a strong management team. I am particularly proud of the way some of our managers have grown, and the way we have developed our team through natural progression rather than always recruiting externally. You can buy and implement technology, but if you don’t have the right people to support it, it will fall apart. So, it’s really been about building, retaining and developing a team of talented people with the capabilities to take the business into the future.
What are some of the most pertinent challenges facing asset managers today and how do you overcome them at Prudential?
There are three main challenges facing asset managers today: fee pressure, the rate of change and regulatory uncertainty.
At Prudential we manage fee pressure through a relentless focus on investment performance and through increasing accessibility to a superior product. We manage costs on behalf of our clients and keep a close eye on efficiency and scalability to keep our fees as low and transparent as possible.
To deal with the rapid change in the industry we make sure that we are always actively engaged in industry change and aligned to how technology is progressing across a broader set of industries. This enables us to be more pro-active than reactive in our approach to change.
When it comes to regulatory change, it’s all about working with the industry and regulators to make sure that we understand the regulations and, where possible, we can influence to facilitate a better outcome for the industry and our clients.
In which areas of the asset management space do you see the most room for complete overhaul, or genuinely fresh thinking?
Given the pressure on fees, I think there’s opportunity for fresh thinking along all the aspects of the value chain. Fresh thinking will allow us to re-evaluate our operating models and the way we do things, and hopefully, we’ll come up with a way to produce a better result at a lower cost.
I specifically think there is a massive opportunity for fresh thinking across the industry where investment managers are focused on things that aren’t really their intellectual property (IP), so things like administration or regulations ( i.e. KYC or Reg reporting ). Currently each asset manager or administrator is carrying out the exact same tasks and changes to keep them compliant, in isolation. But it isn’t necessary to do things this way.
If you look at the operations of many firms, some parts could be shared utilities if standardised. The investment therefore should be on collaboration and changing to consistent and common processes. One of the reasons that there are so many challenges with outsourcing is because no asset manager has a standard back-office model. There is opportunity for the industry to collaborate to begin to standardise certain in-house administrative processes, which could result in more efficiency for all. For example, Blockchain has the power to completely transform certain processes in the back office, but it works best in a collaborative environment. Of course competition and differentiation would continue in other parts of the business like the investment teams.
I believe this presents an opportunity for fresh thinking in terms of collaboration. I believe, as an industry, we could be better at reducing costs if we were better at collaborating. This will require fresh thinking, trust and standardisation.
How do you believe the South African asset management industry is faring in terms of digital transformation and how do we compare to other markets?
The investment management industry is focused on risk management and protection of people’s assets, so is naturally very conservative. There are pockets of excellence when it comes to digital transformation, but I think relative to other markets we are lagging behind.
In the UK for example, there are a number of consortiums focused on addressing industry-wide issues like transfer agencies and communication protocols. There are other jurisdictions where the regulators are actively participating with the investment managers in consortiums and “sandpit” to create new products. While there is some mention of it in the press with POCS’s like project KHOKA, we are doing very little of this on the industry’s Buy side.
For greater digital transformation to happen in the South African asset management industry there needs to be an active industry-wide effort, working with regulators and industry utilities to better position ourselves.
How will new technologies like AI and machine learning affect SA asset managers in future?
Within individual asset managers, big data definitely presents an opportunity for machine learning to come into play. Firms generally have large amounts of internal and external market data that need to be analysed. There is no doubt that machines and AI can carry out these tasks quicker, more efficiently, cheaper, and with less bias than humans. I know there are a few fund managers who have already started to use machine learning I to augment their research and analysis processes.
However, I think it’ll still be some time until AI is used to make the final investment decision. The investor appetite for a fully-fledged AI investment manager is not there yet, but I think it will progress over the next decade. AI will one day be one of the best members of your analyst team. Or at least the most efficient and consistent. That said, the best results will be achieved through human-machine collaboration – the key will be setting up your organisation in a way that maximises this collaboration.
Have you ever experienced company issues relating to technology replacing people? How did you deal with these?
It is human nature to fear change, we all do. I think our job as a corporate is to make it clear to employees that they’re not going to go to sleep one night and wake up the next morning to find that a computer has taken over their jobs. It’s a process and a journey.
But we do know that the world of work is changing and as such, we’re working with our teams to, where relevant, help them reposition their skills and thinking.
We know, for example, in future we’ll need fewer people to do data capture and more who are able to manage data analytics. Similarly, we’ll need fewer people to email reports to clients and more who understand natural language programming so that they can build the automated response engines. With this in mind, we’re trying to skill our people towards cloud computing; data science; business analysis and agile project management.
How does Prudential use technology to overcome obstacles and remain competitive?
Technology on its own, is not useful. But technology paired with the right people and the right thinking can be used to simplify our business; to make it more efficient, more scalable and keep us relevant. This has been our main focus since I joined the company.
Going forward I think there is an opportunity to use technology to find an edge through differentiating what and how we do things – whether that be through reducing costs and delivering higher-quality customer experiences; through improved analysis through the use of Big data ; using technology to position new products ; or AI generating new opportunities for Alpha generation.
Combined with the right talent we can make technology more efficient and scalable to give our business a competitive edge in terms of analysis, product offering and the way we service our clients.
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