CXO Corner: Dr Frank Wellhöfer, Managing Director, MEAG:
promoting growth in a hostile climate
Dr Frank Wellhöfer is Managing Director at MEAG. After studying business management and finishing his doctorate in Würzburg, Germany, Frank Wellhöfer began his professional career in 1992 at Ernst & Young, before moving to Oppenheim Kapitalanlagegesellschaft.
In 1999, he joined Generali Investments Deutschland Kapitalanlagegesellschaft, where he was in charge of the Risk Management, Back Office and Information Technology units, as Managing Director.
Since 1 October 2009, Frank Wellhöfer has been responsible for the Investment Controlling, Back Office and Information Technology divisions in his capacity as Managing Director at MEAG. Founded in 1999, MEAG is a leading independent asset management company for institutional and private investors. MEAG is responsible for the global assets of Munich Re Group and one of the leading asset managers in the European insurance landscape, currently managing assets of around €210 billion for Munich Re Group as well as private and institutional clients.
# Journal: Handing over the word from Marc van den Berg, COO at PGGM, who launched our recurring column in the last issue of the Journal of Applied IT and Investment Management, we would like you to share some of your views on the best means of ensuring continued business growth. In a financial and economic climate that is likely to remain hostile for some time to come, the financial software system supporting investment managers’ business becomes even more critical in reaching this goal, and we would like to know what you see as the top priorities in this respect?
Frank Wellhöfer: In the current unstable global economic climate, the immediate future looks far from easy for the investment management industry as a whole. So in times like these, senior executives have to pay as much attention as possible to cost control. However, it is important to look at cost reduction in a long-term strategic perspective and not only with a view to quick and convenient solutions over the short term. We should always be in a position where we are prepared for the future – for instance, the German economy is performing quite well at the moment but we have to be prepared for any changes that may occur quite rapidly.
# Journal: And in your view what should be the main investment management software building blocks in place for accomplishing this goal?
Frank Wellhöfer: It is important to regularly prioritise projects applying the principle of cost efficiency. All projects have to be evaluated with a view to establishing which ones generate the best efficiencies. By these means we can identify low-value and no-value projects to determine which IT projects we should concentrate on. Here, it is important to establish a suitable framework for creating cost transparency and identifying cost drivers. In this way, costs can be managed actively. Strategic cost initiatives need to be implemented and reviewed regularly, and this is a decisive factor in having an integral and long-term view resting on future revenue growth and increased profitability.
# Journal: If future revenue growth and increased profitability are to be safeguarded as you recommend with the help of strategic cost initiatives, what in your view is the best IT strategy to be applied to help achieve this?
Frank Wellhöfer: In order to ensure technical support to promote continued growth, an investment management company’s information technology and business strategy must be aligned. In my view, this goal can be best achieved by applying the leading high-quality investment management software that is focused on standard solutions. High quality in this respect means providing a stable, innovative and integrated platform based on state-of-the-art technology where the various functionalities are modular and based on a front-to-back approach.
# Journal: If the appropriate investment management software system is one of the key criteria ensuring successful business operations, in what ways, drawing on your long professional experience, can it prove beneficial in helping to reduce cost and promote flexibility?
Frank Wellhöfer: Quality, standardisation not excluding flexibility, integration and automation are key determinants here. Software enhancements have to be fully integrated in the standard platform and not only in isolated functionalities. The software processes must be easily comprehensible and transparent for the end-user. The software supplier must be able to react to changes in the short term and to provide flexible and adaptable solutions that are also designed for the long term. Systems performance level is always a topic in this respect and goes hand in hand with parallel demands for automation.
# Journal: While stressing these technical requirements, and agreeing that the right choice of investment management software system is key to promoting growth, would you agree with the proposition that it is not only the investment side of handling assets under management that has to be considered but also a software system for handling assets and liabilities?
Frank Wellhöfer: I absolutely agree that choosing the right investment management software system is crucial in these areas. The system must be efficient, capable of handling assets and liabilities, robust in structure and execution – here a standard approach is very important for me – as well as displaying innovation, speed and flexibility.
# Journal: Adding to the current industry challenges already touched upon, the pattern of greater market volatility, increased financial instability and more regulatory change is also creating challenges as well as opportunities for the investment management industry. What in your view are the main drivers for success in this uncertain regulatory climate?
Frank Wellhöfer: One main driver for success is to establish an optimal IT infrastructure to reduce costs per item in terms of assets under management; it’s easier then to position oneself for new regulatory challenges as they emerge. Solvency II’s introduction in Europe is a case in point. Very important also is to have processes in place that anticipate cost challenges as they arise; and this applies equally to risk management. Therefore we have established an elaborate risk management process with well-documented tasks and areas of responsibility. So cost control and risk management are interconnected and interrelated.
# Journal: Looking ahead, what do you foresee emerging as the main cost challenges and growth opportunities for investment management companies in general and for the pension and insurance funds industry in particular?
Frank Wellhöfer: Clearly one challenge here are the manifold regulatory requirements that the investment management industry currently has to deal with. The world is changing very rapidly these days and for the business, risk management and the IT structure have to be able to anticipate and accommodate these changes. Flexibility has to be established and then maintained to adapt to these changes, while at one and the same time finding the best means to drive operational costs down, or at least exercising a degree of control over the cost base. Maintaining flexibility also creates opportunities for growth, so striking the right balance is clearly the issue here.
# Journal: With an already long career in leading investment management companies, what do you do to keep up to date with new insights and trends in your professional field of interest? Do you for instance participate in industry conferences and networks with peers and academics to share knowledge and experiences?
Frank Wellhöfer: Here I pay special attention to keeping up with the qualifications and high skills of associates and key players in the industry. This involves a continuous process of further education, training and dialogue with peers. Cooperation with universities and research institutes is also a very important factor to take into consideration. In my experience, the means to accomplish this include participation in strategic workshops, key initiatives and industry conferences, as well as networking with peers.
# Journal: Thank you for your interesting observations. With a view to taking the discussion a step further in the next issue of CXO Corner, whom would you like to hand over the word to and what would you like this person to discuss?
Frank Wellhöfer: I would like to hand over the word to my colleague, Michael Jarzabek, General Manager at LBBW Asset Management Investmentgesellschaft mbH, who I would like to give his opinion on reconciling growth imperatives with cost constraints without jeopardising risk considerations.
