Investors continue to expect strong risk-adjusted returns, attractive fees and a growing requirement for a digital client experience. Investors also expect Managers to provide good oversight, governance, transparency and full compliance with all regulatory obligations. ESG issues will also play an increasing part of managements agenda.
To help meet these challenges, firms are exploring how technology can help transform their businesses. In an ultra-competitive marketplace with so many different investment offerings, managers are working harder than ever to attract new customers and retain existing customers. I expect to see greater adoption of new technologies that can help play a critical role in addressing these challenges. Improving their investors' digital experience and automating their investors' regulatory journey can only help in this regard. Managers are keen to understand how technology can help manage this regulatory change, ensure full compliance and safeguard their brand name/reputation.
Overall, the industry is paying a lot more attention to Transformation initiatives around technology and how this can impact their future product & IT development roadmap. The shift to Passive & Alternative Investments continues to grow and in a low interest rate environment, investors continue to explore non-traditional investment options.
That said, the adoption of new technologies is slower than in other segments of Financial Services like what we see with challenger banks and wealth management platforms.
Regulatory pressure isn’t going away in 2020
In the past few years, we’ve seen regulators focusing their attention on the big banks, it’s only a matter of time before extra scrutiny becomes a bigger part of the agenda for smaller organizations and the buy-side as well.
The top businesses are focusing more time and money on hiring the best risk, compliance and governance professionals and acquiring new technologies to help deal with all of the regulatory change, especially around Know Your Customer (KYC), Anti Money Laundering (AML), Investor Protection, Data Privacy regulations.
Regulators are focusing on businesses risk management policies, how investor are treated, Client Due Diligence (CDD), Anti-Money Laundering (AML) and Know Your Customer (KYC) processes. Organizations should be prepared and ensure that they are following best practice. We’ve already seen a lot of organizations scrambling to adjust to the new Fifth Money Laundering Directive (5MLD), and one thing we can be sure of is more regulatory change ahead.
The good news is that there are technology solutions in the marketplace that help organizations streamline regulatory processes and follow best practice. The alternative is to lag behind, which could open firms up to more operational costs and regulatory risk, so it makes sense to act now.
What will Asset Management look like in the next decade?
Compared to other industries such as e-commerce or media streaming, the financial services industry has been generally slow to adopt new technologies. However, digitally-savvy investors have come to expect a more streamlined, digital experience. As more firms develop digital transformation plans, the risk of losing clients to competitors that provide a superior user experience is becoming more critical than ever. We need to see the buy-side picking up the innovation pace in order to stay more relevant and competitive in the financial services industry.
Client Lifecycle Management (onboarding, periodic reviews, maintenance & offboarding) technologies will be a key area of focus in 2020. Automation in this space within the Asset Management community is relatively immature. There’s a huge amount of paperwork, emailing, the use of spreadsheets and documentation requests involved in the onboarding process. The ability to digitize these client journeys and integrate with upstream and downstream trading systems will greatly help speed up this process, improve the CX and drive operational efficiencies for those businesses. In addition, providing a better digital onboarding experience via investor portals and integration with CRM solutions will change the game and suit the needs of digital native customers.
Who will be the winners and losers this decade?
Performance will continue to be the main driver but those who deploy the right technology will continue to differentiate themselves in a positive way. The winners will be the ones that are faster to adopt, become more efficient, improve the client experience and deliver better all-round business results for their various stakeholders.
I still think the buy-side industry – predominantly Asset Management and Asset Servicing – are now starting to see the positive impact that technologies can play in helping to automate client onboarding, improve the customer experience and automate the regulatory journey.
2020 will be a year of continued evolution. The strongest players have specific digital transformation projects underway and are moving faster than their competitors, and they will be the winners and leaders in their segments.
The slower adopters will steadily lose market share, unless they start to explore and change.
If your organization is looking to address some of the challenges I’ve outlined, get in touch to see how Fenergo could help.