Regulations stifling boutique innovation

Regulatory complexity may be having a negative effect on the product innovation of boutiques, according to State Street Corporation's report on the rise of the specialist manager. 

Regulatory uncertainty was at the forefront of boutiques managers' minds in relation to product development, with one in five citing regulatory approval as the biggest challenge in bringing new products to market.

One quarter of boutiques said they needed to upskill on the impact of regulatory change to their product offering.

And it is having an affect on product innovation. Only 6 per cent of boutiques rated their ability to validate and launch products quickly and efficiently in major markets as 'very strong'.

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Boutiques were increasingly looking to outsourcing to allow them to focus on their core business, State Street said.

Over half of the boutiques managers believed their business would be significantly or very significantly affected by regulatory change over the next five years, although one-third said they had insufficient knowledge to meet these challenges head-on. 

Boutiques were stuck in a battle between capturing returns and avoiding risk, State Street said.

Risk aversion topped boutiques managers' list of factors driving decisions, with 39 per cent of respondents rating it as number one.

Yields were still important, but fell behind risk with 30 per cent of respondents rating it as a top priority.

Boutiques saw back-office operations as their main area of weakness. Only 29 per cent of boutiques rated their operation and IT structures as 'strong' or ' very strong'.

Despite this, only 29 per cent of respondents thought their existing operational and IT structure would permit it from achieving its strategic objectives.

State Street said providing a high level of detail and quality information to clients was the top data management challenge faced by 52 per cent of boutiques managers.

Sufficient scale for in-house systems was the main challenge for 42 per cent of managers, while 22 per cent said their ability to capture and report regulatory data needed improvement.