Tip 3: Develop a lightweight process to identify unprofitable products

Every investment organisation should have some systematic measures in place to measure product profitability.

This need not be full-blown activity-based costing with every employee filling out time sheets, but a combination of lightweight financial analysis and qualitative issue tracking can provide management with meaningful information to identify unprofitable products.

In fact, the 80/20 rule strongly applies and the development of sophisticated product-profitability tools not only places serious operational impost on the business, but rarely gives management much more meaningful information. This assumes that high-level analysis properly identifies key cost drivers and has a means to track the allocation of these to various investment products.

As with all management information, quantitative analysis should be supported by other less scientific measures. Management may have a gut feeling about where undue time and effort is being spent on products, but this needs to be supported by further analysis.

For example, a simple but effective way to identify existing problems is to review the list of operational meetings that have occurred across the organisation over a set period of time (say, one month).

Typically, this will expose issues that may be attributable to specific products for further investigation.

Running an effective product process continues to be a major challenge for many investment organisations. Implementing a structured and transparent search and evaluation process, using project disciplines to manage implementations and deploying a light profitability process are necessary prerequisites to ensure products run effectively.

The good news is that to address these needs, major operational changes are usually not required and using commonsense principles, such as those described above, can often be sufficient to deliver significant improvements.

Bruce Russell is a director of Shoreline Partners, a financial services consultancy.