A vision of the future: five essential skills tomorrow’s asset management tax function will need

June 09, 2017

PwC’s Asset Management Tax conference, held in London on 9 May saw delegates discuss the increasing pressures on asset managers in response to tax and regulatory requirements and the consequent evolution of the tax function in a modern asset management firm. Their conclusion? The tax function of the future will look very different.

With asset managers operating in uncertain times, the pressures on their tax functions are set to increase. Moreover, this squeeze will be felt in different contexts: not only are investors looking for more bespoke and tax-efficient services, particularly given the detailed information they are now providing through know-your-customer processes, but also, regulators and tax authorities are becoming more demanding too.

These trends are heading in only one direction. PwC’s Asset Management 2020 report predicted that for asset managers to be successful in certain markets, they will need to put more boots on the ground and invest in local operations. This is likely to give asset management firms a greater exposure to local tax authorities. As the country-by-country-reporting regime (CBCR) intensifies, with data becoming visible to tax authorities over the next 12 months, increased questions and enquiries from tax authorities are likely to require more time and resources. The CBCR rules could expose asset managers to increased public scrutiny and reputational risk – tax must play its part in helping asset managers to avoid such damage, managing internal and, increasingly, external stakeholders with the utmost care.

The list of issues is getting longer and longer – from the greater transparency required under MIFID II to the demands of financial transactions taxes, asset management tax functions will have to work ever harder than ever to both ensure compliance and generate value for investors.

Standing still, in other words, is not an option for the tax function. To survive and succeed, tax managers and the broader tax function will need to develop new skills – they will have to ensure the lights stay on while managing change with agility. In practice, that will require five key changes:

More strategic partnerships

Too many organisations, including many asset managers, are struggling to incorporate tax in their wider business strategy. The challenge for the tax function is to work harder to understand what the business as a whole is trying to achieve – and then to focus on how tax can contribute.

In practice, that will require asset managers’ tax functions to develop their own vision for the future, with a strategy that aligns with the rest of the business. A top-down approach to driving through an operating framework that delivers this strategy will replace today’s bottom-up, document focused approach to tax.

This effort will fall short, however, if tax is unable to build strong relationships at C-suite level, communicating effectively with the CFO and CEO to facilitate better decision making.

Bolder change management

Taking a tighter grip of process will help asset managers adapt their tax functions to the evolving needs. Better use of technology tools – including simple steps, such as greater use of automation in basic applications such as Excel – can improve efficiency and deliver more consistent outputs. Focusing on process throughout the tax function will produce productivity gains.

For some asset managers, the key to evolving the tax function may lie in a bold structural decision, such as a large-scale outsourcing that frees up in-house staff to focus on strategic goals and high-value tasks. Managers will need to consider the range of outsourcing options in light of their key skills and business needs – what could be done better in-house and where does it make sense to hire third parties?

Managing outsourced relationships to deliver effective and efficient value will be a key task for tax in years to come. Tax managers will also need to convince regulators that their due diligence has been thorough – some outsourcing of tax may even require regulatory approval.

Better use of data

Data, analytics and other emerging technologies will be crucial to asset managers’ tax functions. One recent PwC survey found that 66 per cent of tax departments want to move towards automated workflows and document management in order to generate better data aggregation and analysis.

The tax functions of asset managers already collect, store and analyse huge data volumes, but asset management as a whole lags other parts of financial services in its adoption of analytics tools and other technologies. Tomorrow’s tax teams will understand that data and technology will not only underpin the asset manager’s compliance responsibilities but also enable them to generate business value and better serve investors.

A shift towards oversight

With those working within the tax function requiring different skills – from data analysis to change management – the role of tax managers is set to change. Technical proficiency may become less important than the ability to oversee the function effectively as it strives to meet its strategic objectives.

Tax functions will also need to focus on employee recruitment and retention. Individuals with in-demand skills such as data analysis are already in short supply; tax managers’ ability to build teams of such individuals will determine their ability to deliver the service required by the rest of the business – and its clients.

Budgeting knowhow

The final piece in the jigsaw for tomorrow’s tax functions will be the ability to win sufficient budget for the tax function and broader tax initiatives. With asset managers’ margins under pressure, this may be challenging, particularly since tax has less history of requiring large budgets for change programmes than, for example, compliance.

Building a value case will be crucial in convincing finance to release funds, but tax teams may also have to think laterally. Can budget be secured from other functions – as part of a broader regulatory change programme, for example? What returns on investment will new technology deliver? Could an outsourcing project be part of the deal with the Finance function?

If you would like to discuss how PwC can help your firm in dealing with the above challenges, please contact us:

Elizabeth Stone

Elizabeth Stone | Asset Management Taxation
Profile | Email | +44 (0)20 7804 9678


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Lachlan Roos

Lachlan Roos | Financial Services Partner
Profile | Email | +44 (0)20 7213 1309


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Next week, Teresa Owusu-Adjei will conclude with the final blog of this series focussing on the global markets and opportunities that the evolving marketplace offers amid the challenging complexities of tax and regulations.