Nicholas Pratt talks to Daniel Andemeskel, Universal’s new head of innovation, about doing things differently and starting from scratch.
Daniel Andemeskel was recently apponted as the head of innovation management at German funds platform Universal-Investment. Having spent the past five years as head of innovation management at AXA Investment Managers, he is now charged with setting the innovation agenda at the group.
“My understanding of innovation is to see it holistically and across the whole value chain,” he says. “It is not just technology but also the clients and the employees. For example, allowing the employees to work in a more agile environment.”
The move also marks a return to Universal-Investment for Andemeskel, who spent five years at the company between 2003-07 and worked on various interdisciplinary projects and developments.
He will report directly to Universal’s CEO, Michael Reinhard. “You need to be empowered to make innovation work and the ability to work on a one-to-one basis with the CEO is quite unique,” says Andemeskel.
Competing for staff
The firm is also home to an innovation steering committee, comprised of C-suite level executives and others across the company, designed to bring in a culture of innovation. “Fund managers are not only competing with big tech for customers but also for employees,” he says.
“Young people are coming with a totally different view of doing things and with a different structure of working. We are looking to foster the innovation culture and attract a new generation. We tell them that our ambition is to make it as easy to buy a fund as it is to buy a book on Amazon.”
As well as attracting new employees, Andemeskel is looking to incentivise the existing staff. To this end, he plans to instigate a ‘pitch day’ where all are encouraged to come in with ideas, so that they can contribute to the innovation agenda alongside their day-to-day jobs.
But he is also focused on the core operational projects in pursuit of innovation. He has divided these projects into three pillars: distribution, investment and operations.
The distribution element covers the use of AI and machine learning to develop predictive analytics and identify investment trends and client behaviour, as well making the client onboarding process more efficient.
The investment pillar is focused on greater use of alternative data, for example, especially in the ESG field, says Andemeskel. “We are looking to get sentiment data from a wider community than just the ESG factor information, but also some of the fintechs looking to develop sentiment data around ESG fields.”
This pillar is also looking at one of the biggest developments in Andemeskel’s eyes – how to manage the genuine paradigm shift to digital assets. “We are looking at how we digitise real estate assets as well as the ultimate goal, to create a digital fund or a portfolio of wholly digital assets.”
The third pillar, he says, is looking at using technology and innovation in the back office to achieve cost optimisation and operational efficiency, and to ease the burden of regulatory reporting and compliance through intelligent automation and machine learning. “We are also looking to fully disrupt and to build a complete new system from scratch – a new infrastructure that will connect everything from A to Z.”
These are bold ambitions, something not typically associated with the European funds industry and its conservative approach to operational change. Consequently, Andemeskel believes there needs to be a change of mindset towards innovation.
“What people misunderstand is the idea that every innovation has to end in success,” he says. “We have a culture where the risk of failure is not tolerated in an operational sense. The irony is that the business is based on investment risk.”
In his view, however, things are starting to change. “The US has addressed the risk of failure and I think that philosophy is very positive. Even if some things don’t work, you can at least learn from it.”
For fintechs, it is hard because of the regulatory barriers; and for fund managers, it is hard to escape the business-as-usual way of thinking. Encouragingly, though, regulators are more open to the digital assets environment and governments are looking at the potential of distributed ledger technology and the blockchain as a way of encouraging greater competition in the financial services market.
We may be entering a new digital world, but Andemeskel is under no illusions as to the enormity of the task and the need to make radical changes, not least ditching the legacy infrastructure that has held back so many firms. “If we want to improve the existing legacy environment, we can make it faster and more efficient, but is that approach still valid?” he asks.
Instead, firms should be embracing new technology to create wholly new processes. “If you take the traditional mutual fund settlement cycle, it is now possible to do that in real time, if you use the right mix of technology – like AI and the blockchain.”
One advantage for Universal-Investment, and a reason why Andemeskel was attracted to his new role, is its status as a funds platform. “In the last couple of years, the platform economy has become central to encouraging innovation. We have seen it take off in the payments world through the advent of open banking and the second Payment Services Directive.
“We are independent, we connect various market participants and we are the ideal environment in which to build these kind of services. We can offer them to both investment managers and service providers.”
As daunting as the challenges facing the industry may be, one benefit is the fact that they are challenges facing all participants mutually. “Digitalisation and the growth of the platform economy are encouraging companies to be more open and to look at new services and business models,” says Andemeskel.
“At Universal-Investment we are very open to collaboration, not just with incumbent fund managers but also new fintechs. There is a growing realisation that firms can’t do everything on their own. That collaboration will be a key part of managing the digital challenge.”
There are still relatively few directors of innovation but Andemeskel is clear about the type of qualities needed to fulfil the role. “You need to be well versed in the business world as well as a technologist. I am open to new technology but it not all about technology. You also need to have a sound understanding of the business from front to back.”
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