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Magazine Issues » April 2022

Roundtable: Achieving personalisation at scale

Funds Europe – As the wealth and asset management markets come together, will more consolidation be inevitable and what are the implications of more consolidation?

Tummala – As you bring in more tech you should easily be able to scale, and if you use the technology well, it should create cost advantages. There is a cost to adopting technology – if you are not operating at scale, then you cannot afford that capital expenditure, and if you cannot afford that capital expenditure, then how are you able to compete?

If you take the example of Amazon, it’s not just the customer funnel they have, you’ve got to look at the cash they have on their balance sheet and the amount they can burn to take some market share away, so with the right regulations and everything else being in place, how do you compete with these large players who are tech-native? There is a significant journey that our industry has to make in terms of technology adoption.

The industry also has to look more at the periphery. We look at each other, what the other custodians are doing, what the other asset managers are doing or what the other infrastructure providers are doing, but we have blind spots to the things that are happening on the periphery of our ecosystem.

A great e-commerce company has mastered the art of distributing something on a digital channel, so how hard will it be for them to adapt to the funds market? This blind spot has developed because we’ve never really seen the emergence of new entrants. There has been industry consolidation definitely owing to scale benefits that come from either geographical reach-out or sometimes flight to safety, but I think we will have to keep an eye out for these things because technology is going to enable a lot of innovative new competition to come in from other sectors.

Wade – Whenever you get consolidation, you’re also going to get new market entrants as well and people who are looking to differentiate and so they move out of roles and set up their own thing as well, so that’s the other side of it.

The consolidation one is also interesting when you think about the way in which asset managers have speculated on those new entrants and robo-advisers. A lot of them have taken initial stakes in the first couple of years of operation of these new players only to then go on and acquire the capability and the technology later on when it’s proven. In terms of the investor experience, you’re going to see increasing divergence between massive scale-driven providers at one end who are already overwhelmingly driving fund flows in the industry and then, at the other end, a smaller boutique level of service that potentially could be one of the early adopters of some of these things that we’ve been talking about around personalisation and an increasingly tailored view of what that customer is in order to compete.

Gillan – We’ve talked about consolidation among asset managers and platforms, but there’s also lots of vertical integration, for example, bringing custody and administration in-house. For customers, this should be beneficial, because is compresses costs and should mean cheaper products for consumers. But it also leaves space for disruption and for niche players.

I also think there are lessons to be learned from other parts of the financial industry. You can compare the traditional asset management model versus some of the apps that have a micro-finance type approach where they round up your weekly shop and then invest that in a passive fund. This stuff is already out there and there is a customer demand for more personalised services and more app-based delivery. A lot of firms do digitalisation well, there just needs to be more of it.