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Magazine Issues » April 2022

Roundtable: Achieving personalisation at scale

Funds Europe – What are some of the major issues from this blurring from a product perspective? Does it mean greater use of passive products? Do tokenised funds have a role here?

Gillan – The cost compression and that value chain compression lends itself towards passive products. That’s not to say that there is no market anymore for good active products, absolutely not, I just think it’s now becoming harder and harder for active managers to demonstrate that value over and above what are now ultra-cheap passive products.

Data is definitely a big concern and how we use data in a sensible way that really feeds into personalisation. There is the ‘Amazon algorithm’ that will analyse billions upon billions of terabytes’ worth of data, chew that up and present you with a nice, personalised set of recommendations. The asset management industry is nowhere near that yet, but I do think from a product perspective, that’s where we need to get to.

Tummala – Do we use newer capabilities to manufacture existing products in a different way that is cheaper and faster? Or do we completely manufacture a different kind of product? The difference is stark, but I don’t think we have the answers yet.

When it comes to tokenised funds, the big difference is if the underlying assets are tokenised. But then, do you really need a fund structure? If the underlying assets are completely programmable, what value does a fund structure bring? Do you really need to take on the overheads of a fund? Can you not produce a lot more personalised product using that?

We are nowhere near having a widespread availability of tokenised funds, but all an asset manager needs to do when there are a lot of programmable assets is create a protocol of the allocation and then just leave it to the platform to collect those assets. Advice then becomes mostly software. You would be going from seven or eight intermediaries to infrastructure, advice and an infrastructure operator, and subscribe. That would be revolutionary, but the immediate focus would be on using new technology to manufacture and distribute existing products more efficiently.

Funds Europe – In terms of distribution, are we moving towards a more transparent market?

Wade– Yes, I think so, for sure. There is a regulatory mandate that’s been placed across industries to drive greater transparency of both cost, but also the suitability and appropriateness of different products. That’s an obvious win if you’re looking to create a personalised experience to encode the suitability or the transparency of that product into the contract.

From a distribution perspective, there’s also this groundswell around transparency and greater investor engagement with the products in their portfolio. This can be seen in the proxy voting space and the greater momentum that’s building around shareholder activism and greater engagement.

Tummala We talk a lot about disruption, and whether our roles will be relevant. The roles will always be there but we have to adapt.

How we do the role is going to be very different – the shape, function and form will be delivered using significantly different tooling and processes. That’s why the value system is going to have a lot of overlaps between the service providers, manufacturers and distributors.

As we move towards a lot more personalisation, customisation and democratisation, there will be a lot of niche and bigger opportunities. They need not be massive scale opportunities, but I do think the right use of technology will allow you to serve a community of 500,000 investors as easily as 50 million investors.

You might today call us a fund administrator or a transfer agent or a custodian. We need to transform ourselves to be able to support both ends of the value chain to serve these niche communities or scale communities. So our role might transform from being a processing provider to an infrastructure provider.

Gillan– From a distribution point of view, there are massive challenges and massive opportunities, actually.

My nightmare is reading in the newspaper tomorrow that Amazon has decided to go into the passive fund industry – they’ve got a massive distribution network, huge data capabilities and all that infrastructure already there.

The flipside of that is the opportunities this gives us in terms of serving the wider market and niche bespoke markets, and partnering with those big online retailers and partnering with finance apps.