Richard Clarkson, principal solution consultant at Oracle, explains how the asset management market is moving beyond legacy for transfer agency services.
Though an integral part of the financial services industry, asset management firms have been slow to adopt technological changes, especially digital transformation. With only 31% of asset managers currently using mobile apps, the need to adopt the latest technology is picking up.
A report by PwC recommends asset management firms consider the concept of chief digital officers, integrating them full-time into their operations to better support the business. Bringing together more technological resources into day-to-day operations will no doubt improve sustainable growth for asset management firms in the digital space.
Change is, however, underway as more asset management firms now plan to rethink their technology platforms, according to research by Boston Consulting Group. They’re looking to “reinvent their platforms for the next wave of growth, while protecting their business against future adverse conditions”. This also implies today’s asset managers take digital evolution, and the role it can play in their future survival and growth, seriously.
Transfer agents (TAs) and asset managers increasingly need to absorb data from a multitude of diverse distributors and industry sources. This is then collated and the information is served in digestible formats, ideally in near real time, to various stakeholders. With the pace of change and need for expanded offerings, both TAs and asset managers are now looking for global and more connected models to engage in the digital age.
Transfer agents are also focusing on cross-border investment accounting to cater to the increasing global nature of transactions. A continually expanding portfolio and increasing regulatory requirements will require greater investment in technology. Asset management firms and transfer agencies now need to evolve fast. It would be best to start with a phased approach for each business-critical area.
Sales and marketing
Boston Consulting Group estimates asset managers will increasingly deploy digital tools that feature predictive analytics. This will help them offer personalised products and services and create a proactive approach to broadening their pipelines and closing deals. Digital content management is an area of interest for most managers to build new relationships and nurture old ones.
Leading asset managers are now harnessing artificial intelligence (AI) to track and analyse a wide array of data sources including satellite imagery, social media, online reviews and consumer transactions. This data allows them to generate alpha-worthy investment ideas that can be pitched to clients, increasing cross sell and upsell opportunities.
Transfer agents need to understand how they can support this with a consistent data model, particularly when running multiple legacy systems in a country and across geographies. Additional costs are a concern when they need to source data from multiple sources within the TA before it can be utilised.
While functionalities across various players in the industry remain more or less constant, customer experience is going to play a key role in business growth. According to EY, “Asset management clients will increasingly demand seamless, coordinated, visually stunning, rich and easy digital access to their providers.”
To achieve this, the forerunners of technology adoption in the industry are increasingly using emerging technologies such as AI, machine learning and blockchain. These names are no longer buzzwords that intrigued some and scared others. They are real-world enablers of business growth. Several use cases are already in production and delivery phases are underway. Armed with huge amounts of data, managers need to quickly draw business insights and act upon them.
Specialised fintechs are offering solutions as real as suggesting schools based on geolocation data of the investor who is looking to save for a child’s education, calculate a relevant investment plan and suggest a personalised saving plan as per the fee structure and permissible timelines. An AI platform can now easily guess the investor’s age and suggest a retirement plan accordingly. These examples clearly indicate incumbents need to go a step ahead by suggesting hyper-personalised offerings that walk an investor through life events seamlessly.
As smart technologies reduce the need of human intervention, they are likely to bring down distribution costs significantly. For example, robo-advisers are reshaping the distribution models and forcing market participants to react.
Direct-to-customer models are experimented heavily now. Transfer agents need to move to direct-to-channel (D2C) platforms of their own. An industry survey commissioned by Calastone in 2017 found 57% of the respondents believed that online D2C distribution channels such as fund platforms would take over from the traditional channels, whereas just one-fifth disagreed.
There is a need to let open architecture, mutual recognition and passporting regimes allow a fund manufactured in one place to travel to multiple places. This digital-based access will transform the way people buy and sell funds. Investors will no longer be limited by choice of funds or constraints of physical documentation. The increasing use of open APIs will further fuel the boom of innovative distribution models.
Industry experts have also found varied applications of distributed ledger technology into asset management. The rise of FundsDLT, the blockchain-powered fund distribution platform, SETL, a blockchain-based settlement system for the investment funds industry, and IZNES, a blockchain-based mutual funds network, has paved the way for an upward trend in the adoption of the technology.
Disruptors are bringing in new technology to the industry. While emerging technologies are rapidly turning things around completely, rethinking business models, distribution channels, sales and marketing strategies and customer-experience efforts is no longer an option but is now an imperative.
Today, fintechs are using technology to enable investments in new markets, better identify and quantify risk, create solutions more suitable to traditionally unprofitable customers to generate new revenue streams, and propagating alternative distribution marketing channels for customer awareness and interest.
Personalised modelling, for example, is one of the key areas fintechs are focusing on: this will help them anticipate and be prepared for major life events in consumers’ lives.
According to PwC research, 60% of asset managers fear that part of their business is at risk to fintech companies. They need to respond by consolidation and partnerships.
Oracle can help provide the core technology and platform to enable the forward-looking TA and asset manager to disrupt themselves. Oracle’s suite of products and cloud services can be integrated into the existing IT environment to help with efficiencies and growth for the business.
Collaborating with forward-thinking technology partners such as Oracle is one of the simpler, more obvious ways to navigate changing times and achieve business goals faster.
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