Shaping the future of asset management: embracing digital transformation

The future of asset management revolves around digitalisation. Harnessing the power of AI, cloud systems or blockchain is essential to the industry’s growth. By integrating transformative technologies, we can identify patterns, provide personalised services tailored to our clients’ individual needs, and more.

The digitalisation has already started, but its reception is mixed. Those who are hesitant concentrate solely on the risks, such as cybersecurity and data protection. The risks are understandable to the foundation of technology, but with no risk comes no reward, and asset management is well underway.

The leaders of tomorrow – the tech-savvy, digital natives, etc. – are at the door and ready to use these technologies. A fresh mindset, which can only be developed with an openness to change, must be nurtured to realise the advantages of technology and unlock the power it holds.

The next generation: what matters to them and why it should matter to us

Digitalisation is vital for the industry. However, the pace at which one embraces and migrates towards it will have the biggest impact. Industry players who take hold of these advantages and leave their comfort zones will have a competitive edge over those who don’t. Thus, the ever-growing next generation and its ideas must be woven into the asset management DNA. Considering the priorities of the next generation is not only key for inviting them to the table, but also necessary for aligning the asset management sector with its digital trajectory.

The second major transformation is moving towards “all things ESG”. Alongside debates on stakeholder capitalism and corporate purpose, ESG underpins most of the discussions about the future fitness of asset management.

Millennials and Gen Z (born between 1995 and 2010) make up 49% of the global population. Gen Alpha kids (born between 2010 and 2024) will not let us wait too much longer either, as they also hold dramatically shifting needs and even more tech and environmental consciousness. Their attitudes, values and beliefs are bound to influence their investment strategies. Data shows that 82% of Gen Z and close to two thirds of young millennial investors have exposure to ESG investments. By 2025, around 33% of all global assets under management will have ESG mandates. The synergy between the two topics becomes increasingly evident: technology, with AI at the forefront, takes a pivotal role in driving the ESG transformation, holding profound implications for the future of asset management and the demands of the next generation. The AI/ESG fusion is not just about tech advancement; it is a convergence with the potential to reshape our approach to challenges, laying down pathways for a more resilient, eco-conscious world. This resonates deeply with the next generation, which is actively shaping its expectations around sustainable practices.

New technology for the industry – ESG and sustainable finance: aligning with values and purpose

In asset management, we must embrace the shift towards conscious investing and integrate ESG considerations into our strategies and all parts of the value chain. Companies failing to adapt may risk alienating potential investors and clients, limiting their growth opportunities in the long run.

Action is currently being taken at different levels. The EU’s commitment to sustainability and environmental protection has led to the creation of regulations and guidelines that encourage companies to adopt ESG practices. The European Green Deal and the Sustainable Finance Strategy aim to mobilise capital towards sustainable investments, encouraging asset managers to play a proactive role in financing environmentally friendly projects. By promoting sustainable finance and green initiatives, the EU is creating an environment for the asset management industry to attract socially conscious investors and contribute to a greener future.

Luxembourg: fit for the future?

Despite its small size compared to neighbouring countries, Luxembourg possesses a strong ecosystem that gives it a competitive advantage. The Luxembourg Sustainable Finance Initiative (LSFI) has launched a sustainable finance strategy to establish the country as a sustainable hub, focusing on awareness, unlocking potential and measuring progress. The Association of the Luxembourg Fund Industry (ALFI) has introduced ALFI NextGen, an initiative aiming to increase the visibility and influence of young professionals in the field.

Luxembourg fosters the development of innovative technologies incubated in the Luxembourg House of Financial Technology (Lhoft) to enrich the local market. Many of the startups are active in developing services for the asset management industry, with some of them already successful in delivering value. The Lhoft is a hub connecting financial services organisations, IT companies, regulators and academia, playing a pivotal role in offering opportunities to the market and investors, and accelerating growth. Additionally, the fostered companies act as employers for the new generation to develop its ideas, think outside the box, and build careers in the intersection of asset management and technology. ICT Spring brings together thousands of professionals every year, offering a unique opportunity to get tech updates and network with peers and future business partners in fintech.

The mantra “the old ways are often the best” no longer holds true. The global market has realised that the innovative forces of the new generation of talents will permanently change the financial industry. Their aspirations bring excitement and ideas that have the potential to reshape the fundamentals of asset management. There is still a long way to go, but the time is now, and the question is how. With so many solutions, let’s explore them!

#TogetherForBetter.

Cet article a été rédigé pour le supplément ALFI de l’édition de  parue le 13 septembre 2023. Le contenu du magazine est produit en exclusivité pour le magazine. Il est publié sur le site pour contribuer aux archives complètes de Paperjam. 

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