Interview: Making Tracks to Integrate FP&A at Hermes Fund Managers

Marc Lloyd, head of financial planning and analysis (FP&A) at Hermes Fund Managers, and a member of the FP&A advisory board, started his finance career in 1992 on the financial management training programme run by British Rail. He subsequently became the commercial finance manager for the English, Welsh and Scottish (EWS) freight firm in 1994, as the UK’s rail industry privatisation drive gathered pace. He soon made tracks for the asset management industry, however, joining M&G Investments in 1998 and spending almost a decade there undertaking financial control and FP&A duties.

Today he is ensconced at Hermes, the asset management firm spun off in the 1980s to run the British Telecom (BT) pension programme, the UK’s biggest. Hermes now offers the same service on a global basis for third parties, with a total of £26.3bn (US$43.5bn) in assets under management (AuM). Lloyd is keen to advance the ‘a for analysis’ part of his FP&A duties. Better technology is an essential component in accomplishing this, he believes, especially as the first step for his firm in any project to specify a new technology system that better supports its real-time, strategic FP&A duties is to release a request for proposal (RFP) to several vendors.

“The purpose of our long-term technology overhaul is to automate as many processes as possible to free up my team, so that we can do value-adding strategic work for the business,” explains Lloyd. “I don’t think it is the best use of talented finance professionals’ time to essentially have them doing administrative accounting or manual budgeting tasks. So the point of this project is to move Hermes fully away from this approach, towards a more real-time, dynamic approach that can identify future opportunities for the business.”

“Hermes already uses a rolling forecast approach to budgeting so that we can provide very quick updates, portfolio assessments and reports to the boardroom, enabling new products, markets or initiatives to be launched at speed,” continues Lloyd. “This was one of the first things I did when I joined the asset manager five years ago.

“We’ve conquered that aspect of financial planning and analysis in my opinion. There is now a robust accounting procedure and a good culture that asks ‘what if’ and investigates new and unusual options on a flexible basis. But I am keen to move on to the next stage and to address our technology support systems next. I want to really emphasise the predictive, future-proofing and strategic forward planning capabilities of the FP&A function – to stress the ‘A for analytics’ in its title if you like and assist the boardroom. For that we need better technology.”

Using Technology to Enhance FP&A and Integrate Analytics

Scoping out the available technology options from Cognos TM1, Hyperion, SAP, Adaptive Planning and its present Infor SunSystems set-up, and scoring them and other vendor pitches against its RFP requirement criteria is the stage that Hermes has reached in its technology overhaul [for more on how to specify a FP&A solution click here].

“We are looking to build and integrate the new systems ourselves using a modified off-the-shelf vendor package,” explains Lloyd. As a regular attendee at the London FP&A Club he has used its networking and knowledge-sharing events to talk to his peers about their technology stacks for comparative purposes. “I’m confident the selection and proof-of-concept stage of our project will be complete by this summer, hopefully allowing us to complete a build out and implementation stage by the end of this year, giving Hermes a scalable solution that can flex up and down as required. It should also future-proof us in a secure, compliant environment for a good few years.”

“Cross-departmental functionality to enable collaboration and to ensure the finance team is truly integrated into all aspects of the business, its decision-making and planning procedures, is one of the key RFP stipulations that we have,” continues Lloyd. “For that reason we are simultaneously piloting the Confluence Unity back-office automation system, which automates the fund administration process and collects, confirms and delivers all necessary product data – and regulatory reporting information – with the aim of ensuring that the FP&A function is more fully plugged into the business.

“If it works as expected we’ll gain access to all available data from all units of the business and vice versa, increasing the internal transparency and communication between Hermes’ various departments, including sales, marketing, finance, the boardroom and so on. It is a powerful tool and while I don’t expect it to replace email it will certainly aid collaboration, auditability for the regulators’ and provide efficiency benefits. When allied to our planned new over-arching finance technology system, I think it will give us a great platform for the future.”

Big Data, People Skills and the Core Function

Lloyd believes that the need for a better technology system to support his FP&A duties is multiplied by the ‘big data’ trend, which has seen the rapid rise of vast amounts of potentially useful unstructured or siloed data become available for interrogation thanks to better business intelligence (BI) tools and the concurrent rise of ‘big computing’ (i.e. cheap computing power). This trend means real-time analytical deep dives are now more viable, affordable and quicker.

“I absolutely agree that FP&A has received a boost in recent years from the rise of big data analytical techniques, but the question has to be if FP&A professionals are making the most out of the vast amounts of data out there? At the moment I don’t think we are. We have to move away from just using ledger or budgeting information and analyse news streams, social media, and other new forms of data if we want to provide faster, better information to the business and identify new opportunities before rivals do.”

“People need to be unblinkered and open to new ideas for this approach to work; otherwise there can be too much data. The skill is to have people who can cut through it and identify what is important and what isn’t. Automating everyday processes and presenting statistical anomalies and patterns using advanced technology systems helps to give senior finance professionals time to focus on this value-adding work. It is one reason why we at Hermes have been embarking on technology projects.”

Conclusions

“Achieving sustainable profitability and incubating the ability to predict and profit from new trends and opportunities early on in the business cycle is our ultimate aim,” says Lloyd. “That is why we are investing in a new technology system to support our evolving FP&A function at Hermes,”

That goal is buttressed by the combination of essential people skills – as outlined in the FP&A advisory board’s definition of the ideal professional’s skillset  – allied to the latest automation, data mining and presentational technology. The combination of knowledge and technology frees professionals up to collaborate, interact with the board, and serve the business.

“The FP&A function and technology will evolve together, each mutually supporting the other,” asserts Lloyd. “The key thing for me is for FP&A professionals to get involved, go to sales, product and board meetings and fully contribute to the success of the business as a full partner. The technology is necessary, but the people skills are crucial. That is why I prefer to recruit people with curiosity, communication skills and a passion to succeed. Computer skills are needed too, of course, but these can be taught – and will be once our new system at Hermes is up and running in 2015.”

Integrating the planned new system at Hermes and making tracks for a dynamic future are Lloyd’s aims for now. He has the green-light from his board to introduce a best practice technology solution and is working full steam ahead to that end.

 

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