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Buy-side firms split on merits of digital transformation

Digital communicationAsset managers are divided on the merits of adopting a digital approach to client communication despite evidence that the majority are failing to meet their client’s reporting requirements, according to recent research.

While some firms are moving ahead with digital transformation plans including on-demand reporting and online portals, others are choosing not to act either due to an apparent lack of demand or a difficulty in building a business case.

The study, ‘Is client communications the stumbling block for next-gen client experience?’, was commissioned by software firm SimCorp and conducted by Aite Group.

It found that 65% of buy-side firms admitted that they were struggling to keep up with client demands for more frequent and granular data.

However, the survey also found that 38% firms are struggling to build a business case for digital transformation projects despite growing recognition of their importance.

An increasing number of client RFPs now include questions on firm’s digital capabilities yet the survey found that 69% of managers have not invested in digital services because they do not see explicit demand.

Similarly, while over 50% of respondents cited failing legacy technology within their client communication function, only 22% are looking to address the problem by investing in digital portals or interactive reporting tools. 

“The survey suggests a divergence within the industry, not only on how to get to a digital future, but also when,” said Paul Sinthunont, senior analyst, Aite Group. “Those asset managers waiting for investors to demand change or believing the demand will never materialize, are betting on a risky strategy indeed”.

According to SimCorp, a key issue is the failure to link client engagement with revenue generation or client retention. Just 5% of firms attribute client wins to effective client reporting and communications. This makes it difficult to understand the correlation between client communications and client experience, stated SimCorp.

In contrast, two-thirds of the firms actively investing in on-demand reporting and digital portals have cited competitive advantage and attracting new investors as key drivers.

“Those firms that don’t act now may well lose investors in the future because they simply don’t have sufficient insight and understanding of  their clients’ needs to deliver a differentiated client experience,” said Phil Lynch, senior go-to-market strategy principal at SimCorp.

The study interviewed 23 buy-side firms in December 2020.

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