Part 3: Technical challenges

One of the suggested ways for asset managers to raise assets is by improving their employment of client data. It is a suggestion that aligns with one of the buzzwords doing the rounds at the moment, ‘big data’. Unfortunately, our survey suggests asset managers have a lot to learn in this arena.

Only 15% of respondents felt asset managers were good at making use of data about their distribution network, of which only 3% strongly agreed. The majority (a total of 51%) felt asset managers were not good at using this data, while slightly more than a third were neutral.

The main factor chosen from a list of issues asset managers face when understanding end investor data was “lack of access”. Lack of internal expertise came next, followed by lack of appropriate technology. Only 17% of respondents said there was “too much data”. (Respondents could pick more than one answer to this question.)

Diana Mackay, chief executive of Mackay Williams, is not surprised by the results. She says the omnibus account system in Europe prevents asset managers from knowing precisely who their clients are. This, naturally, limits how effective asset managers can be in exploiting their data either for marketing or client servicing purposes.

Calastone_survey_May_17-chart_9

What can asset managers do about this? Large firms with a lot of cross-border business may decide to invest in the infrastructure to pinpoint the majority of their end investors, she says. But for many businesses, the cost of doing so is unjustified. “Technology can suck you dry,” she remarks.

When it comes to adopting new technology, and based on their track record for technology implementation, are asset managers doing a good job? Again, the answer is no, according to our respondents. A total of 44% said asset managers were not good at adopting new technology, while 35% withheld judgement, leaving just 21% who agreed with the premise.

Calastone_survey_May_17-chart_10We also asked respondents to rank five forms of technology in terms of their level of priority for investment by asset managers. Respondents were asked to put the categories in order of priority, which we have represented in the chart (11). In order to compare the categories, we have put them in order, top to bottom, so that the category that was deemed the greatest priority appears at the top. This calculation is based on a weighted average of the rankings.

Front-office technology, such as data-oriented distribution systems, came top, with the best average ranking, followed by “websites and mobile apps”. The lowest priority, according to the ranking, was back-office technology, such as order routing and settlement.

According to Mackay, the low ranking for back-office technology may reflect that it is now possible to outsource these functions at very low rates.

Calastone_survey_May_17-chart_11

This is “quite a commoditised service now”, she says. “This part of the jigsaw puzzle has been solved.”

In contrast, the front office, such as data-oriented distribution systems, is “still being worked out”.

The rankings in this question may reflect that our respondents are looking to the future, to areas of investment that are not yet receiving the attention they deserve.

For the final part of the report, click here.

©2017 funds europe

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