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Asset Managers and Advisors​

It’s time for digital to become asset managers’ bread and butter. We’ve already looked at the state of digitalization for financial firms and the wealth of opportunity that digital tools can bring actors. We also looked at specific case studies and how early adopters of digital tools and systems have distinguished themselves as innovative leaders in the industry, even winning awards and recognitions for their efforts.

In this article, we’ll be doing a deeper dive into the asset management industry. We’ll consider the rising threats to asset managers’ traditional business models to understand how technology can help reduce business costs and drive customer-centricity. We’ll also identify specific opportunities for firms to engage in digital solutions.

It’s no longer Business as usual for Wealth and Asset Managers

Last year, global venture investment in FinTech rocketed to $17.4 billion, with total FinTech investment totals reaching almost $25 billion. Many asset managers are left shaking in their boots at these newcomers’ grand entrance into the market. 60% of asset and wealth managers are fearful of losing business due to increased competition.

More worrying still are those firms that aren’t worried at all. 17% believe that FinTechs pose no risk to their activities. Those firms who have not already grabbed the bull by the horns face a bumpy ride in the face of mounting threats to their business models, and their bottom lines.

And it’s not just competition that managers must overcome. Regulatory complexity, criticisms on pricing and compensation, and the growing trend towards passive investment are all factors putting pressure on firms.

The good news is that early adopters of technological solutions have an excellent chance of standing out from the crowd while reducing overall costs and streamlining processes.

What value can Asset Management drive from digital?

Studies have revealed that the asset management industry would be one of the top three financial sectors most impacted by digital disruption by 2020. For a firm proposing active management to its clients, tech solutions can help deliver up to 30% more operation results due to increased efficiency and more accurate product offerings. This figure should be considered in light of distribution costs, pricing pressure, and fierce competition from FinTech firms, which together puts an estimated 20-40% of firm revenue at risk.

As asset managers and other financial actors face the challenges of the future, the question is how value can be derived from digital strategies? Success will be determined by firms’ agility to innovate, to push through customer-centric strategies, and improve the efficiency of their internal workings. To this end, firms must turn to solutions such as CRM platforms and data analytics. There is a wealth of opportunities for asset management firms to support their activities and revolutionise traditional business models, but first, managers must spend time understanding how digital solutions can help them.

Using Digital to Enable and Enhance Investment Decision-Making

Only 20% of firms are currently using Big Data for the purposes of client interaction, but being able to treat and analyse this data is fast becoming an integral factor for determining how well a firm can compete. Currently, market practice is still very much reliant on traditional data analytics, which are used to define investment strategies and to provide advice for clients. Yet times are changing.

Thanks to significant advances in technology, firms are now able to exploit new digital avenues to nourish their strategies. For example, recent studies show that up to 80% of institutional investors regularly turn to the vast amount of information available on social networks to identify rising trends and opportunities. These social platforms can reveal meaningful indicators from events, public reactions, and other trends that may affect the activities concerned by the firm.

The overwhelming amount of available data, both unorganised and structured, is now accessible and can be turned into actionable insights. Big Data analytics, combined with powerful Machine Learning, is changing the rules of the game.

The growing digitalisation of firms and market infrastructure is enabling better decision-making in response to real-time information, using advanced analytical tools and data models. Asset managers can use Big Data and Machine Learning to reduce production costs and enable new digital distribution channels, improving efficiency and effectiveness. Putting the thought of margins to one side for a moment, managers should remember the broad scope of these systems: data analytics are also indispensable tools for compliance and risk management departments. Big data can transform the way an entire firm does business.

The Power is in the detail

Big Data is composed of three main components, the 3 V’s:

With Big Data analytics, firms are able to detect and treat subtle market signals to filter the benign from the meaningful. Deviations from trends or undercurrents of changing market signals may otherwise go unnoticed, but Big Data is able to consistently consider even these smaller indications and draw general conclusions. For example, smaller market signals may lead to the discovery of factors which in turn indicate a potentially larger event or trend that merits closer inspection.

The benefits of internal automation at the heart of the firm

With Big Data analytics, firms are able to detect and treat subtle market signals to filter the benign from the meaningful. Deviations from trends or undercurrents of changing market signals may otherwise go unnoticed, but Big Data is able to consistently consider even these smaller indications and draw general conclusions. For example, smaller market signals may lead to the discovery of factors which in turn indicate a potentially larger event or trend that merits closer inspection.

Technological advances have allowed all aspects of firms’ activities to evolve. For example, the financial department of Société Générale put in place a digital platform that allows them to automate production of their reference document, increasing efficiency by 30%. It improved information clarity and streamlined the process, and it also reinforced collaboration through team engagement and interaction. Société Générale received positive feedback for its endeavour by its partners and peers, notably audit firms and the French Market Authority.

In terms of communication, email threads and meeting notes can quickly become overwhelming, making it easy for employees to make mistakes or for some requests to be overlooked. There are numerous communication tools that cater to the multi-departmental workings of asset management firms and other financial companies. The volume of exchanges can be reduced thanks to a consolidated thread that keeps conversations, projects, and additional notes or files in one handy place. Better yet, new additions to the team have access to the entire historical pipeline on a topic (subject to managerial-controlled permissions) strengthening accountability and harmonising transfer of ownership for tasks and projects.

Connecting Customers: A true Digital Revolution

The asset management industry has been slow on the digital uptake. Less than a third of asset and wealth managers offer mobile applications to support their businesses. But mobile Applications are not a nice-to-have, they are crucial. They provide asset management firms with a way to personalise communications with customers, provide notifications and updates, consult their wealth managers, and follow performance. Clients are accustomed to convenience at their fingertips, sleek designs, intuitive usability, and sophisticated technology.

Ultimately, technology will enable asset managers to explore new ways of communicating using digital channels. For example, the French Asset Management Association (l’Association française de la gestion financière) has identified the opportunity through digital means for asset managers to re-appropriate their interactions with clients and reduce their reliance on intermediaries.

The rise of robo-advisors is also shaping the future of the asset management industry. These highly efficient platforms respond to demands for customer experience while providing affordable services and guidance for potential investors. For firms, this can mean lower on-boarding costs and more effective conversion rates, while relying on the rich stores of information that they already have in place.

From A firm-led model to Customer-Centric Strategies

Customers’ expectations for a personalised service and for efficiency enabled by digital systems requires that asset managers must become more agile to be better able to respond to individual clients’ investment objectives, and to offer tailored solutions. Advisors and managers should take full advantage of these opportunities to more effectively engage clients across every interaction point in the customer lifecycle. Their reputation and customer retention rates depend on it.

About the Author

After completing his training in M&A at Skadden Arps, Anastasios Papadopoulos founded Integrated Management Systems (IMS) in 2016 and played a key strategic role in positioning the company as one of the leading Digital Transformation Agencies in Hong Kong.

He brings with him his experience in M&A and Tech, and also founded IMS Digital Ventures: the innovation, incubation, and investment arm of IMS and Hong Kong’s first corporate venturing firm that launches and invests in disruptive businesses with Asia’s largest corporations.

Anastasios Papadopoulos read Law in France and in the UK and holds a Management degree from HEC Paris.

Connect with Anastasios Papadopoulos on LinkedIn.

Browse more articles by Anastasios Papadopoulos.

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