Cutting-Edge Tech Is Great, but Relationships Remain Vital

In our fast-paced investment world, we often focus on the pursuit of cutting-edge technology. Here at Morningstar Indexes, we’ve just completed a three-year project to introduce a completely new  index calculation platform. We built this very much with a view to facilitating rapid growth – and indeed we’ve been the fastest-growing index provider for the last two years – and therefore the system provides a robust infrastructure with a multitude of scalable and flexible microservices capable of handling multiple datasets and data sources.

While we’re very proud of what we’ve built, we recognize that investing significant resources in developing scalable and efficient technology solutions isn’t that uncommon among index providers. However, a somewhat unexpected set of experiences during a business trip to Asia reminded me of the huge value, over and above the importance of hard facts and solid technology, of personal connections. Despite possessing the best technology in our business, success still hinges on establishing excellent person-to-person connections and truly collaborative relationships.

The index industry has historically struggled to gain significant traction in Asia because of its diverse economies and cultural preference for alpha-seeking strategies, so the region is a key target for Morningstar Indexes’ expansion. The purpose of my trip was to meet with key stakeholders at clients and potential clients, many of whom had unique ideas for indexing and index-based products.

Having spent three years building a turnkey solution for scalable index calculation services, my suspicion was that Morningstar Indexes would be well placed to meet this new demand. And I wasn’t wrong; at the outset, our discussions revolved around the technical prowess of our index calculation service – its scalability, accuracy, flexibility, and efficiency. The response was positive, with many expressing admiration for the technological innovation we brought to the table.

However, as we got deeper into the discussions, it became clear that our physical presence, and our local team, was key to gaining trust and credibility. Potential clients were glad to see the effort expended on meeting with them in person, being well prepared to discuss their needs, and the demonstrated commitment to the market via our local team. They were also very aware of the conflicts of interest between our dual roles as both an index provider and a provider of index calculation services for index creators and owners. So, knowing that we had built both a platform and an environment specifically to allow us to handle our and our clients’ data in such a way that mitigates that conflict of interest furthered that trust and credibility.

Finally, it became evident that product providers in Asia are not solely looking for a basic service provider; they are seeking enthusiastic collaborators. The firms we met were not merely interested in the features of our index calculation service; they sought a partner who understood their unique needs and challenges. For them, success means finding a unique niche in the market, so customization of the underlying index is key, and a one-size-fits-all approach falls short. The discussions naturally shifted toward collaboration – the willingness and ability of our team to work closely with them to understand their needs and goals, to tailor index designs that aligned with these needs, and then a commitment to support them after their products were in the market. This support includes the ability to give them easily accessible local routes to Morningstar Indexes’ global team.

The passion and commitment we bring to the table, coupled with a genuine desire to contribute to clients’ success, sets us apart in a crowded market. Firms are keen to work with partners who share their enthusiasm and are willing to go beyond a conventional client/service provider relationship. This makes our dual approach – demonstrating both technologically superior solutions but also flexibility and easy access to Morningstar’s expertise – a very strong offering.

Morningstar Index’s role is naturally evolving from providing a service to becoming a trusted advisor to our index clients. They need help perfecting their plans, navigating the complexities of index design, and building the success of their launched products. By offering comprehensive guidance and support at both the pre-and postlaunch phases, we are positioned not just as a solution provider but also as an integral part of clients’ product development and management process.

The overall result of my trip was a significant shift in perspective. I suspect it will remain challenging for our industry to gain traction in selling index services in Asia, but with the right approach, I think Morningstar will be able to expand rapidly in the region. We’re better placed to serve clients wherever they are. Beyond the allure of groundbreaking technology, the journey underscored the enduring importance of person-to-person contact and the need for enthusiastic collaboration. And while I may occasionally squirm at the need for regular human contact (!), these interesting, collaborative conversations that we need to have in the provision of index services are actually great. While indexing can sometimes feel like a back-office part of financial services, here we’re fostering genuine partnerships and becoming an integral part of what our clients do – and hopefully helping drive success for the end investors, which of course is what it’s ultimately all about.