Carte blanche – Alfi 2021

Digitalisation: transforming the face of fund distribution

Said Fihri, partner and head of fund distribution services at KPMG Luxembourg. (Photo: KPMG Luxembourg)

Said Fihri, partner and head of fund distribution services at KPMG Luxembourg. (Photo: KPMG Luxembourg)

Over the last few years, many people predicted a technological revolution that would disrupt the way fund shares are sold in Europe. The simultaneous rise of various technologies (e.g., blockchain and AI) was interpreted as the beginning of a new era in the asset management industry.

This “Big Bang”, however, has not happened. The industry is going through a significant transformation, and ignoring that fact is a risky game to play. Every so often, we see fresh digital solutions from established asset managers as well as new entrants offering new ways of investing. A steady increase in these types of solutions means that, before we know it, there will be an exponential acceleration that is set to leave non proactive players in the dust.

Client interaction

Interaction with investors is becoming increasingly digital. Indeed, due to the COVID-19 pandemic, communication between advisors and investors happens online. What’s more, robo-advisors are continuing to gain traction in Europe with an estimated €14bn AUM as established asset managers and fund distributors join forces to develop such solutions.

Overall, fund distributors have improved their digital offering towards investors with more user-friendly interfaces. This is hardly surprising given the new generation of clients they are dealing with: clients actually looking for a fully digital service. Young high-net-worth individuals sit a world apart from their parents, who enjoyed talking investments from the comfort of a Chesterfield at a private banker’s office.

Some asset managers believe in more direct channels with several entities in Europe diving into the direct-to-consumer (D2C) model – a strategy that could pay off in the future if inducements are fully banned.

Consolidating data in operations has indeed become key to improving efficiency.
Said Fihri

Said Fihri,  partner and head of fund distribution services,  KPMG Luxembourg

Managing operations

As distribution networks become more digitalized, asset managers need to develop an effective strategy that fits into this new world.

The application of blockchain to fund distribution (at FundsDLT, for example) shows a new operational model already exists. Beyond the technology itself, an ecosystem where various systems can seamlessly exchange data has been created.

Consolidating data in operations has indeed become key to improving efficiency. KPMG, for instance, offers an online dashboard where asset managers can visualize their fund distribution processes in one place. It is accessible through the KPMG Digital Gateway, that allows clients to efficiently manage their data for risk, tax, governance, and strategy purposes.

What to expect

So, what does the absence of a big bang demonstrate? Well, first off, the grip that intermediaries have on retail investors – something that will likely remain in the future. Further digitalization of investor interaction will mostly depend on intermediaries.

There’s no doubt that a new operational model is required to remain relevant in this new world. Asset managers can lead this transformation by either developing more direct channels or working more closely with their distribution network. What we know for sure is that staying passive in such a fast-evolving environment could prove to be very dangerous.