the evolution ofthe manda tethe : solutionsrevol ution€¦ · a change in mindset, ... asset...

Financial Services

THE EVOLUTION OF THE MANDATE: THE SOLUTIONS REVOLUTION

AUTHORS

Joshua Zwick, Partner

Nikki Lugo, Consultant

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. In an industry where adding

value has historically meant offering better products, such as picking the right stocks or

bonds, what will differentiate successful firms from also-rans, going forward, will be the

ability to add value through quality advice and holistic portfolio solutions. For many asset

managers, this trend requires a rethink of their business models. More importantly, it entails

a change in mindset, from adding value with products to adding value through individualized

advice and customized portfolio solutions1.

But what exactly does providing investors with “solutions” mean? There is no precise, one-

size-fits-all definition and solution offerings may have multiple components to them.

Some common solutions offerings (see Exhibit 1) include:

Exhibit 1: Common investment solutions

OUTCOME-ORIENTED PRODUCTSProviding access to packaged products, such as target-date funds or absolute-

return funds, designed to meet an investor’s specific risk appetite, time horizon, and

investment goals

LIABILITY-DRIVEN INVESTMENT (LDI)Designing an investment that reflects unique characteristics of liabilities to minimize

surplus volatility, while maintaining or achieving fully-funded status

OVERLAY SOLUTIONSUnderstanding an investor’s entire portfolio, tracking all positions, and analyzing the

effects of potential portfolio adjustments to efficiently maintain target allocations

(e.g. through building a completion portfolio)

OUTSOURCED CHIEF INVESTMENT OFFICER (OUTSOURCED CIO)Acting as a fiduciary for clients, overseeing investment portfolios, and managing decisions

such as asset allocation, manager selection, monitoring, etc., on a discretionary basis

ADVISORY RELATIONSHIP (CAN BE PRODUCT-INDEPENDENT)Engaging deeply with investors as a long-term investment partner, not unlike an

investment consultant, to provide manager due diligence, investment monitoring and

reporting, and to adjust investment strategies according to an investor’s evolving needs

and objectives

1 For asset managers that have already spent the time and resources to build their solutions capabilities, the perspectives shared in this piece should help them get a better sense of the range of approaches adopted in the industry and where they fall within that. For others in earlier stages of development or contemplating moving in this direction, the discussion should help illuminate the pros and cons of different approaches and foreshadow the challenges that will need to be addressed head-on in order for their efforts to be successful. Although outcome-oriented solutions have drawn attention from all types of asset management clients, this paper will focus on solutions for institutional investors.

Copyright © 2015 Oliver Wyman

A common element running through all solutions is that they involve more than traditional

single-asset-class mandates. Whether that means products tailored to meet a particular

hedging or return-profile need, a multi-asset class outsourced CIO program, or a more

comprehensive advisory service, a solution offering, when done well, elevates the role of the

asset manager from a product vendor to a trusted advisor.

Given the evolving needs of investors, successful asset managers will be those that

can provide either high-quality and sustainable alpha or extremely cheap beta, or else

those managers that can deliver a much broader array of multi-asset class solutions and

advisory offerings. Managers that cannot credibly offer at least one of these capabilities

will increasingly become marginalized and face an important decision as to how to address

the intensifying demands of investors. Given the well-known challenges of generating

consistent alpha and building the scale to offer cheap beta, we believe the focus for many

asset managers needs to be on building out their solutions and advisory offerings to deepen

their existing client relationships and ensure their ability to meet the evolving demands of

investors in the years to come. Simply changing titles or sprucing up marketing documents

will not be enough. Developing a genuine solutions capability will require a meaningful

commitment of resources and careful consideration of a number of critical challenges.

In our work with leading asset managers across the globe, we have identified five key

questions that need to be addressed when building out a solutions capability:

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?

Copyright © 2015 Oliver Wyman 3

1. OVERALL PROPOSITION

Perhaps the most fundamental element to consider when defining a solutions capability is the

offering itself. As noted, the idea of “solutions” has taken on many forms, essentially covering

anything beyond single-asset-class strategy offerings. While most managers share the common

goal of engaging more deeply with investors, what they provide varies greatly (see Exhibit 2),

ranging from product-led offerings to broader advisory solutions.

Exhibit 2: Spectrum of solutions offerings

PRODUCT SOLUTIONS ADVISORY SOLUTIONS

CO

NS

PR

OS

• Creation of new mandates with clients• Direct link between research/analytics

e�orts and revenue generation• Straightforward, packaged

solutions o�ering

• Limited by products o�ered in-house• Doesn’t address full scope of

client objectives

• Provide holistic solution, considering overall portfolio and objectives

• Collaborative investor-manager relationship

• Manager seen as “trusted advisor”

• Requires more time and resources• Advice may not always lead to

new mandates

At one end of the spectrum, there are asset managers whose solutions offerings tend to be more

product-focused. Generally, the offering is built around some core products (e.g., LDI, multi-asset

class funds) that cut across different product silos or capabilities within the firm. The solutions

team is charged with working with the different asset class offerings to pull together the product

solution. In many cases, the “sale” starts with the group conducting an analysis of the client’s full

portfolio to identify gaps and then recommending solutions based on products offered by the firm.

Structuring a solutions offering in this way helps align the research and analytical efforts of the

group with the commercial objectives of the organization. A key challenge is that the breadth of

the solution is limited by the suite of products offered by the firm. The more focused the product

offerings, the more investors may ask themselves: “Is this truly the right product for me, or is this

just the best product that this provider has?” For firms with a relatively narrow product suite, the

risk is that investors may feel the advice is biased or that only a part of their needs and objectives

are being addressed. The broader the product suite, the less pronounced this issue becomes.


At the other end of the spectrum are managers focusing primarily on providing advice. This

approach is the most collaborative (and most resource-intensive), often involving in-depth,

bespoke analysis and extensive work building a detailed understanding of the investor’s portfolio,

objectives, and concerns. Investors feel as though they are interacting with a team, rather than

with distinct silos. The solutions group serves as a partner and “trusted advisor” to the investor,

identifying the right path to achieve their goals and providing the necessary support along the

way. While the relationship is typically anchored by a meaningful product mandate, the breadth of

the services can extend far beyond the management of a particular product to include everything

from third-party manager due diligence and monitoring to bespoke risk reporting to capital and

tax modelling.

Managers offering this type of holistic advice must be able to dedicate the research and analytics

necessary to address the wide range of client questions and concerns. And while there may be

an emphasis on in-depth client engagement, there is no guarantee that such efforts will result in

additional commercial opportunities. Despite this, firms that adopt the role of trusted advisor tend

to take a longer-term perspective—it’s rarely about short-term commercial gains.

2. SCALABILITY VS. CUSTOMIZATION

The greater the emphasis on designing custom solutions based on a particular client’s needs

and objectives, the more resource-intensive and less scalable the offering is (see Exhibit 3).

Utilizing prepackaged products is a more straightforward and scalable approach, but it lacks the

customization and flexibility that clients value. Of course, providing a bespoke solution and/or

responding to a range of ad hoc requests with one-off projects is significantly less scalable and

requires a more specialized skillset, but the value to clients is often significantly greater.

Exhibit 3: Spectrum of scalability

FULLY SCALABLE FULLY CUSTOMIZED

CO

NS

PR

OS

• Ability to standardize portfolio analysis• Ability to systematize product implementation• Repeatable for many clients

• Won’t always address unique client needs• Limits depth of client relationship• Relies on products for di�erentiation

• Ability to develop solutions addressing unique client needs and objectives• Development of higher quality relationships, leading to increased business elsewhere

• Requires specialized talent and expertise (e.g., similar to investment consultants)• Demands solutions/analysis be built more from the ground up, which is more resource-intensive


For many asset managers, the notion of supporting a non-scalable business – particularly

advice-heavy ones – is daunting and represents a departure from the standard model.

Focusing on developing products to meet the needs of a distinct set of investor archetypes

(e.g., target-date/life-cycle funds, inflation-protection offerings, LDI, etc.) makes achieving

scale easier and can allay concerns about resource consumption. Taking a step beyond

investment products, solutions providers are increasingly looking to create a “solutions

menu” that seeks to standardize and systematize the way client portfolios are analyzed

and the way in which product solutions are implemented. While more efficient, the scope

of solutions provided tends to be more limited, making it more difficult to meet the unique

needs of each individual investor.

Among those asset managers with more developed and structured solution capabilities, the

approach tends to be more collaborative, combining customized advice, bespoke portfolio

analysis, and custom-designed product solutions. To provide this level of consultative

service, firms set up a dedicated team of resources available full-time to answer client

questions and address concerns. Portfolio solutions are built from the ground up, involving

a detailed analysis of the investor’s portfolio and establishing a customized investment plan

to meet the client’s concerns and objectives. While there is certainly a place for utilizing

common templates and approaches, managers who offer customized solutions with heavy

advisory-driven elements often end up having to expend significant resources to support

“one off” analyses. Consequently, even solutions groups with a large dedicated staff will

require established governance to ensure the proper rationing of the advisory capacity.

These staffing decisions affect the margins associated with a customized solutions offering

and are typically driven by an assessment of the long-term revenue potential of the client to

the firm. In other words, while providing every client with customized advice, analysis, and

products may sound great in theory, the economics of the business dictate a more targeted

and disciplined approach focusing on those clients that represent the greatest strategic or

commercial benefits.

So what is the right balance between customization and scale? Is there a way to find scale in

truly customized solutions? Managers that have most effectively navigated the two opposing

goals have done so by systematically identifying the common elements that run through

many of their engagements (e.g., portfolio risk analyses) that can be recycled across a wider

array of clients. By standardizing these common “widgets” and streamlining often-repeated

processes, the business can achieve some degree of scale, which frees up time to focus

on executing the more bespoke aspect of the work for the highest potential value clients.

The more customized and advisory nature of the solutions business will generally not be as

scalable as traditional asset management products; however, those firms that have gone

down this path recognize this reality and have unquestioned support from the highest levels

of the organization because of the longer-term benefits of this approach to the firm.


3. ORGANIZATION AND STAFFING MODEL

While the objectives tend to be similar, there is a variety of operating models pursued in the

industry. At one end of the spectrum are managers that have fully dedicated teams; the largest

groups have well over 50 resources. At the other end are solutions groups that represent more

of an ad hoc collection of resources throughout the firm, headed and coordinated by a small,

dedicated team. In our discussions and experience working with asset managers, we see three

broad operating model archetypes, which, for the purpose of this report, we have labeled “virtual,”

“coordinator,” and “standalone” (see Exhibit 4).

Exhibit 4: Overview of different operating model archetypes

VIRTUALNo centralized/formalized function; may involve some “tagged” individuals

COORDINATORCentral point of contact coordinating solutions that span product verticals

CO

NS

PR

OS

• Project teams can be flexibly assembled according to specific client needs and situation

• Lower cost/less resource intensive

STANDALONEFully sta�ed, centralized team with broad advisory and portfolio management capabilities

• Provides clear “figure head” with strong advisory orientation

• Project teams can be flexibly assembled according to specific client needs and circumstances

• Fosters cohesiveness andclearer accountability

• Less need to source resources from other areas

• Own IC and research agenda

• Bandwidth limitations can makesta�ng complicated and put pressure on ability to execute

• Lack of centralized point person to provide direction

• Contributes to perception of lower level of commitment

• Bandwidth limitations can make sta�ng complicated and put pressure on ability to execute

• Success of solutions group highly dependent on cooperation/involvement from other areas

• Requires sta�ng group with a significant number ofprofessionals and ensuring the right mix of capabilities

• Needs increased buy-in and support from the top

Exhibit 5 is a stylized representation of how the various models can be organized.

Exhibit 5: Organization of different operating model archetypes

VIRTUAL COORDINATOR STANDALONE

Sr. leaders

Quants

Analysts

Risk

Actuaries

PMs

Sr. leader

Support

Support

PMs

Analytics

Traders

PMs

Analytics

Traders

PMs

Analytics

Traders

Risk mgrs

Quants

Risk mgrs

Quants

Risk mgrs

Quants

Other(e.g. actuaries)

Quants



.

.

.

CA

CA

CA

CA

.

.

.

CA

CA

CA

CA

.

.

.

CA

CA

CA

CA

Note: “CA” refers to client advisor or client service team.


VIRTUAL OPERATING MODEL

Under the virtual model, asset managers provide solution offerings but do not necessarily

have a full-time, dedicated team. Designated individuals from other areas lend time as

needed (and as availability permits) to cross-asset class or solution-oriented engagements.

A pseudo-team of investment and risk staff may be assembled on an ad hoc basis in order to

respond to a particular client request or a particular product offering. This operating model

is well suited to managers with robust existing mandates who want to add another layer of

service for clients. It can also be a low-risk and resource-light way to test client responses

and assess the impact before investing in additional resources to build out a formal

solutions function.

This model makes it easy to address one-off questions and requests from clients, without

having to maintain a dedicated staff. Moreover, the pseudo-team can be assembled as

needed to ensure the right expertise is utilized to address a particular client request or

situation. The more pressing issue is what to do when the right resources are not available,

which can be a persistent problem given that the most valuable resources typically have an

array of other responsibilities that may take precedence.

COORDINATOR OPERATING MODEL

The coordinator model relies on individuals from other parts of the business but features a

dedicated senior leader (or a few leaders) who act as a central point of contact to coordinate

all solutions offerings. Firms will often bring in a designated Head of Solutions, who will

build out a small support team of about five to 10 dedicated professionals. This group then

assembles the right team by borrowing the necessary investment and analytical staff to

address client questions, execute individual projects, or construct the investment solutions.

While the solutions group often owns the process of assembling the team, given the

situation, the direct relationship remains with the client advisors or client service team.

We have not seen clear examples where the solutions team owns or manages the client

relationship; rather, they are brought in to situations at the discretion and direction of the

client advisor.

Having a senior leader provides a clear point person and “figurehead” both internally and

externally. (S)he is able to provide senior level perspectives and experience, which brings

credibility to discussions and helps ensure that the proper solutions are offered to clients.

While the design and coordination of each client engagement is centralized, and there

is significant flexibility to assemble the right collection of resources from other areas, the

issue of availability still remains. Depending on the capabilities, the mix of resources in the

solutions group, and the availability of analytical systems and standardized templates, it

may be necessary to draw on investment professionals outside of the group. Given the value

of these resources and their other responsibilities, resource allocation issues can become

acute, which can limit the scope of client engagement and reduce the impact of the offering.


STANDALONE OPERATING MODEL

In the standalone model, the solutions group is a centralized function, typically staffed with

a range of investment, risk, and other market professionals. The group may draw on the

expertise or targeted support of individuals from other parts of the business, but it otherwise

is self-sufficient. Similar to the other models, however, ownership of the client relationship

typically remains with the client advisor teams.

With the larger, more self-sufficient team, these groups typically own their own research

and IC development agendas. And since the team is dedicated to providing solutions, from

standalone advice to multi-asset class mandates, finding available resources becomes much

easier. The capacity created by this model allows the organization to have both broader

relationships (across more clients) and deeper relationships (more intensive interactions

with each one) to maximize the value of the offerings.

It is important to note that building up a large solutions group in this way is not without risk—

it requires significant resources and commitment from the highest levels of the organization.

Most importantly, it requires finding the right people with the right set of skills. As the

engagements with clients become more consultative, the need for this type of experience

becomes more critical. In fact, we’ve seen a trend of money managers bringing in executives

from investment consulting firms to run their solutions business. Indicative of this trend

is the fact that over 30 consultants joined money managers in the first three quarters of

2014 – almost twice the number for all of 20132. The increase in investor demand for multi-

asset class, outsourced CIO solutions, and broader portfolio and risk management advice

makes professionals with an investment consulting background an attractive fit for the job.

2 “Consultants move to investment side: Increase in sophisticated strategies leads to senior-level changes”. James Comtois, Pensions & Investments, 2014.


4. REVENUE MODEL AND INCENTIVE STRUCTURES

Though solutions capabilities have developed and matured over time, the question still

remains: Is this capability simply another firm resource to which our clients will have access

or is it a distinct offering, responsible for generating additional revenue? The answer often

has direct implications for how the team is compensated (see Exhibit 6).

For some asset managers, offering advice is seen purely as a value-added service available to

existing clients. The goal is to use the advisory capabilities to elevate the discussion beyond

a particular asset class mandate to more strategic issues around portfolio construction, asset

allocation, liability management, etc. Engaging clients in these types of discussions is an

effective way to deepen and broaden the relationship, which can make the business stickier,

as well as potentially enable the sale of additional mandates in the future. The important

point, however, is that regardless of whether a future mandate comes to fruition or not, the

resources providing the advice are not directly compensated for any future sales. Instead,

advice is dispensed free of charge and with no explicit tie to the sale of any mandate, thus

ensuring the solutions group’s focus on providing quality, unbiased advice.

The problem with this approach, like any free resource, is that clients will take as much as

an asset manager is willing to give, making it difficult to define boundaries. For example, a

one-off question could easily spiral into a major research and analytical effort, requiring a

large number of valuable and expensive resources. This situation can become economically

unviable, ultimately necessitating a rationing of resources and/or the targeting of more

profitable clients3. For firms that view solutions solely as a value-added service providing

independent, high-quality advice, the compensation systems are structured accordingly,

i.e., the groups are incentivized and compensated based on a more subjective criteria around

client impact and contributions to building quality, trust-based relationships.

Exhibit 6: Spectrum of compensation structures

RELATIONSHIP-BASED REVENUE-BASED

CO

NS

PR

OS

• Clearer value proposition around unbiased advice

• Focus on solutions and not generating revenue

• Emphasis on developing new and deepening current relationships

• Lack of boundaries defining scopeof service

• Risk of dedicating resources with no back-end commercial benefit

• Di�cult to measure success of the group• Potential perception of lack of real value

as it is “free of charge”

• Incentivizes revenue generation for the firm

• Readily available metrics for incentivizing group and measuring success

• Can undermine credibility of advice• May discourage some client

interactions if perceived as overly product-focused

3 Some managers commented that in certain instances where the project work is highly customized or complex, they will consider assessing a distinct project fee, which offsets the economic drag of using the resources.


At the other end of the spectrum, managers can opt for a much closer link between

compensation of solutions professionals and services rendered and/or the size and

performance of specific asset management mandates. This will be the case where the

solutions group acts as more of a product-delivery mechanism or where there is a closer

product linkage to the service (particular multi-asset class products, LDI, outsourced CIO,

etc.). As long as all fees and associated incentives are clear, there will not be any undisclosed

conflicts of interest. However, the closer the connection between the group’s product sales

and compensation, the harder it will be for the firm, both in reality and in terms of client

perception, to offer truly unbiased advice. While the advice component can be charged for

separately, that is not the common practice. Instead, the industry has adopted two models.

In the first, the solutions group is viewed as an advisory business in which compensation

and incentives are loosely tied to product-related revenue. In the second, the structure of

the group within the organization, the nature of its products it offers, and the cultural norms

of the firm result in a much closer link between the group’s compensation and the revenues

generated from specific solutions mandates.

5. MANAGING CONFLICTS

Offering truly unbiased investment advice, of course, raises the risk of internal conflict. The

advice may jeopardize existing mandates or lead to mandates going to other firms that have

better strategies that fit that client’s needs. Managers have to weigh the value of revenue-

generating mandates against relationship-building engagements and determine how to

manage situations in which the two conflict (see Exhibit 7).

Exhibit 7: Approaches to addressing mandate-advice conflicts

PRIORITIZES FIRM MANDATES PRIORITIZE INDEPENDENT SOLUTION

CO

NS

PR

OS

• Current mandates with clientsare protected

• Aims to grow asset managementbusiness with the client

• Internal conflicts minimized

• Higher risk that advice is perceived asbiased, based on current mandates orin-house o�erings

• Certain types of engagements may beo�-limits if they represent risks to

existing mandates

• Advice fully aligned with client needsand delivering right solution

• Potential for broader dialogue and canhelp foster deeper trust with client

• May lead to internal conflicts with other groups or sales team,undermining support for the business

• Could put current product revenueat risk


Part of what drives a manager’s approach to this issue is the breadth of the firm’s product

offerings and scope of relationship with a given client. Firms that are more product-focused

or that have a one-dimensional product relationship with clients will find it more difficult to

align investor needs to these investment products while adhering to fiduciary standards.

Often the most direct way to navigate these potential conflicts is to identify them upfront

by reviewing clients’ portfolios, along with their objectives to determine whether or not an

existing product offering works well with their overall portfolio. If not, and there is clear risk

to the firm’s core mandates, a potentially difficult decision must be made around how to

best engage the client. The likelihood of facing a difficult decision like this will be less likely,

however, for firms with a broad suite of product offerings: What may put one product at risk

will likely open an opportunity for another one.

For other firms, the notion of internal conflict is acknowledged but is not managed in any

direct way: The role of the solutions groups is to act as an unbiased advisor and to provide

advice best suited to the client, regardless of how that may affect existing mandates. For

example, several firms we spoke to commented that in those cases where their firms do

not have an offering suited to the clients needs, they help with the due diligence of other

managers. Part of what makes this approach possible is a heritage of a “one firm” approach

and a culture of serving clients, typically with a strong advisory bent. As these firms have

grown up with this mindset, they also seem to have the most significant support from the

highest levels of management, making these conflicts easier to navigate.

The truth is that often—especially where there are large, concentrated equity mandates—

these groups may offer advice that is unpopular with the sales teams but ultimately is right

for the client. From their perspective, any business loss is offset by the deeper relationship

gained with the client and the numerous long-term benefits that that can bring.

Whether the choice is made to prioritize existing mandates or to prioritize the delivery of

advice, it is critical that a deliberate choice is made; failure to address these conflicts and put

in place the strong management to enforce either approach risks creating a lack of clarity

around the value proposition to the client. Sending mixed messages is worse than sending

no messages at all.


WHERE TO GO FROM HERE?

The industry is moving in the direction of offering holistic solutions, not just products.

Institutional investors are demanding it, and the concerted efforts by many of the world’s

largest and most successful asset managers are a testament to the permanence of this

trend. While the details vary—and as firms position themselves at different points along

the spectrums highlighted in this report—we see three main archetypes emerging as firms

position themselves for this trend.

ADVISORY GROUP

This group tends to be a smaller standalone team with senior leadership and a handful of

dedicated analysts. The objective of this solutions group is to provide customized advice to

clients as part of a broader firm relationship. Compensation is not based on AUM or selling

products, but rather on the impact the group has on clients by providing them with quality

advice on key strategic investment topics that span the entire portfolio.

SEPARATE, MULTI-ASSET CLASS PRODUCT GROUP

This larger, standalone team includes senior leadership, as well as a dedicated staff of

portfolio managers, risk managers, and analysts. The portfolio managers work closely

with client sales teams and focus on selling and managing multi-asset class products, as

well as customized solutions. Compensation for this group is generally linked to AUM and

performance, although it will vary depending on the particular role.

PRODUCT-LED, COORDINATOR GROUP

This solutions capability is not supported by a standalone team, but rather is coordinated by

a small team of senior leaders. They call upon a shared analytics group as needed to conduct

research and review client portfolios. In many cases, the result of the analysis and research

leads to a recommendation of in-house products to help fill gaps or address particular

investor needs.

If you have already chosen your path, the key issue is how to best leverage the capabilities

you have built. A useful mnemonic helps highlight some fundamental actions we believe are

required for ongoing success:


ALIGNcompensation structures to cement the mindset of being a “trusted advisor”

ENSUREthe right mix of talent

IDENTIFYactivities that can be systematized to build more scale

OPTIMIZEthe capacity management model

UNDERSTANDthe necessary technology and operational support models required to meet the greatercomplexity of an advisory/solutions-oriented offering

If you are in the early stages of building out your capabilities, we would encourage action,

but suggest caution around how best to proceed. Taking an approach that balances a sense

of urgency with a more deliberate articulation of a clear roadmap produces the best chances

of success. Once you have a good sense of the direction you’re taking along the various

dimensions highlighted in this paper, it is critical that the difficult questions that those

choices imply are tackled head-on. Waiting can lead to implementation risk down the road

and reduce the traction the initiative needs. For example:

• What are the exact economics of various models; what scale do you need; and what time horizons are realistic for investment amortization?

• What capabilities need to be built and where can they be best sourced from; how should the integration into the rest of the firm be handled; and what are the advantages of building in-house vs. sourcing externally?

• As more and more players look to build solutions, what would a truly differentiated proposition look like?

Offering a return stream isn’t enough. While there will always be demand for high-quality

alpha and low-cost beta, we would argue that there are limited number of firms that can

consistently offer outsized returns and very few that have the scale to compete on costs.

Even for those that can do this successfully, competing purely on performance or low

fees is a vulnerable, one-dimensional strategy. For most firms, long-term success is about

transforming themselves from a provider of products to a provider of more holistic solutions.

Products may help get you in the door, but it is only by helping clients address their strategic

challenges and creating holistic solutions that you can become comfortably ensconced in

the living room.


Oliver Wyman is a global leader in management consulting that combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation.

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