Many regard asset management as a traditional, slow-moving industry. Its reluctance to innovate and adapt to new technology has seen it trail other areas of finance, such as trading and retail banking, when it comes to the adoption of technology. But this is changing.
40% of asset management professionals say digitalization is their firms’ priority. And they’re acting on their words. Incumbents are investing in solutions in-house whilst disruptive startups enact change from the ground up.
Rising from the ashes
The ‘08 crisis slowed aspects of finance. In the decade since asset management has focused on making sure that a crisis doesn’t happen again. Compliance and regulation (think GDPR and MiFID II) have been prioritized.
But in the wake of ‘08, technology positively disrupted some areas of financial services. For example, as traditional lending dried up, tech companies offered alternatives, and alternative lending – now worth billions of dollars, including peer-to-peer and crowdfunding – was born.
As fintech grew, traditional money management dropped behind. Investors could manage their money via robo-advisors and use low-cost investment services and passive vehicles. Traditional asset management was becoming irrelevant. It needed to respond. Slowly but surely, it has.
Today’s tech offering
In theory, technology should give asset managers and their sales teams more time to build relationships and service clients. With opaque, complex changes, such as GDPR and Brexit, causing operational and financial headaches, technology can help firms remain competitive.
We’re seeing two (three) types of change. First, tech is causing incremental improvements. Blockchain, for example, is securing records, like paper and centrally-located computer files are retired. A.I. is also offering optimized distribution and compliance, lowered risk and richer client experiences.
Second, we’re noticing step changes, such as investment in big data, which is allowing managers a better chance to understand the market and client needs.
Tech and hedge funds
Hedge funds know the value of the client. Many are deploying technology in order to service them better. Machine learning is being employed by a host of firms to improve the investment process and more than half of hedge funds surveyed by BarclayHedge use AI to inform investment decisions and generate trade ideas. Many are also looking at opportunities in future-tech markets, like crypto. Whilst volatile, these markets have brought rewards. Embracing the new has paid off, and not just on the investment side. Fundraising is being supercharged with technology, and back-office process is being optimized too, enabling smaller funds to compete with larger enterprises.
Despite this shift, the human touch remains important. Thus, successful funds are combining cutting-edge tech and the highest-quality people in order to get the best out of both.
One shift we have seen is that funds must look beyond the traditional talent pool to find the highest quality portfolio managers, analysts, and quants. If a fund deploys machine learning, they’re going to have to hire the right candidate to deliver these innovations. Finding this talent is increasingly difficult for managers. And, if they fail to deliver on the promise of technology, the client will be left unsatisfied.
Improving the customer experience through personalization is the key to customer satisfaction. For example, offering clients mobile, interactive, asset monitoring tools are now a minimum requirement. Ernst & Young states, “asset management clients will increasingly demand seamless, coordinated, visually stunning, rich, easy digital access to their providers.”
It’s just the beginning
As asset management grows more comfortable with the possibilities of technology, other avenues for growth and customer satisfaction will appear.
Shifting demographics are another reason to invest in technology. $15trn in the US and $12trn in Europe is about to be inherited by 18 to 25-year-olds. This cohort is an opportunity for firms but they demand first-class digital experiences. Those that build products to suit their needs will be rewarded with assets.
Of course, we must be wary of technology. We need outcomes, not hype. But technology is being integrated by top firms now. Those burying their heads will be left behind. Ernst & Young warns: “digital immaturity is a death knell of sorts to those who will insist on late adoption.”
The invention and application of technology is increasing exponentially. Asset management cannot evolve quickly enough and we must accept that there will likely be a broadening gap between developed tech and its implementation. The trick for firms is to know what’s important to them. If they can get that right, and implement the correct level of technology, their future in the industry will be secured.
Here at Edgefolio, we look to empower your business with the use of technology. We will accelerate your technological adaptation and put you ahead of your competitors, especially when it comes to tapping into new leads and communicating with existing clients.
Want to learn more? You can easily get a sense of our product, or find us on any social media. We are always keen to have a personal talk with you. For any inquiries, you can reach out directly to us here.
The Edgefolio Team
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