Asset managers are missing the bigger picture if they see digitalisation only as a way to cut costs. For sure there are still substantial efficiency gains to be made from automation, and pressure on fees makes this work urgent. Yet fund businesses need to have a broad digital strategy which will give them better understanding of end investors’ needs and behaviour.
The fund industry is one of the few businesses that develops its products without really knowing what end clients want. The result is a market with too many funds struggling to be viable because they lack sufficient critical mass of assets under management. Investment strategies are central to most funds’ offering and communication activity, but this product centric approach leaves many potential investors cold. Alternative ways need to be found to foster trust in potential new clients, and to reinforce existing investors’ loyalty.
An interoperable ecosystem in which players co-operate to ensure lean processes and efficiency throughout the customer journey is required.
Olivier Portenseigne, Managing director & chief commercial officer (Fundsquare)
Compare this with the strategy adopted by the likes of the food producer Danone. When positioning a yoghurt, they don’t focus on the ingredients or production techniques, rather they build a narrative about the eating pleasure experienced by contented consumers. Other financial sector industries have evolved in a similar way, but most asset managers take an old-style approach. It’s little wonder their brands often fail to stand out and be relevant, requiring them to invest heavily in direct marketing to generate sales. Information is vital to creating a new strategy that helps build a brand.
This must come from end investors through digital marketing interaction, and all others involved actors, particularly independent financial advisors and distributors who know local markets. Every other player in the fund production and distribution supply chain also needs to contribute, including fund platforms, depositaries, and transfer agents. An interoperable ecosystem in which players co-operate to ensure lean processes and efficiency throughout the customer journey is required. More interconnection will let investors’ data flow through integrated feedback loops.
They have pushed aside old-style agencies, while taking services to the next level.
Drawing this information from a variety of sources will result in rich pool of data from which value can be extracted. Using data analytics, detailed investor profiles can emerge that will enable asset managers to address tailored messages in the culture-language clients understand. This process is only manageable through digitalisation.
Even on a more basic level, when clients do decide to subscribe to a fund, the process is often too laborious. A smooth digital client experience would ease on-boarding, and facilitate suitable product selection and swift trade settlement.
The most successful digital players in other sectors use agile, interoperable platforms that boost interactions between back-end partners. For example, in the travel industry, booking online is facilitated by tools which quickly gauge our preferences based on multiple information sources that contribute to creating a client profile. A complex ecosystem of aggregators, meta-search engines, and full-service platforms has emerged. They have pushed aside old-style agencies, while taking services to the next level. The close relationships that we build online with travel companies are almost entirely absent in the asset management industry.
This type of infrastructure will create the foundation for digital transformation.
Innovations such as the emerging blockchain-based infrastructures for fund distribution will be platforms on which data can be shared and market intelligence strengthened, as well as introducing highly automated trading and settlement processes. These distributed ledger technologies will deliver cost savings and improve the processes needed for a better client experience. Moreover these systems will enable the creation of innovative, data driven value added services.
The asset management industry is only at the start of the digital transformation process. However we do know that new systems will need to be as open as possible, and facilitate co-operation and the sharing of data. This type of infrastructure will create the foundation for digital transformation. This will be the resource which in the coming decades will deliver the tailored solutions clients want.
