It is becoming more and more evident that the wealth and asset management industry is going through a digital transformation. Changing technology is making space for a new breed of digital competitors with innovative solutions aiming to disrupt the industry. Increasingly, clients are demanding and expecting online tools and mobile functionality to be part of their online user experience along with a seamless customer experience.
Where is the asset management industry at now?
Whilst asset management firms are making digital investments, not all are far enough along in their progress. A 2018 report by Alpha FMC, ‘The State of Digital Readiness of the Asset Management Industry,’ surveyed 15 of the largest global asset management firms, with a collective £7trillion under management. Respondents included digital directors, chief digital officers, amongst others.
The report claims that 61% of asset managers consider digital transformation to be at the ‘getting organised,’ stage, meaning they have an emerging digital strategy with decisions already taken on allocation of budget to improve digital capabilities.
As for how firms explain their current position, they claim that their development has been “frustratingly fragmented.” Legacy technology issues are highlighted as being one key barrier to development by two thirds of the respondents. Firms are deterred by the expense involved in replacing existing technologies and upgrading to modern ones. Other factors such as failure to realise earlier on that digital transformation should be a priority and differing views on the extent of digital disruption and where this will come, have all slowed development.
On a positive note, most of the 61% currently at the ‘getting organised’ stage were looking to progress to the next level of ‘Following fast’ in the next 2-3 years. The report defines this as “Having strong capability, but still ‘conscious competent’, with scope to progress.”
What should asset managers be doing?
Change of focus
The real change needed is the shift from a product-centric approach to a client-centric one as client behaviour and expectations change. For instance, areas such as fund marketing, display and distribution need to be prioritised. The key is to concentrate on how to get the funds into the customers’ hands, rather than on the digital infrastructure behind new products. It is up to asset management firms to realise change means opportunity, as with some careful investment in digitisation, they can position themselves at the forefront of the industry and ‘future-proof’ themselves.
Take notice of millennials
In every industry, not just the asset management industry, firms run the very real risk of losing out on this technologically savvy generation to rivals who are prepared to take measures to meet this demand. Asset managers should consider what exactly will the experience of investors and users be when they access their company website or investment portal. Does it meet their expectations, or does it look outdated and therefore unappealing? Is it easy to use? Is the information provided straight forward and easy to understand? Millennials are not so shallow as to base their decision on where to invest purely on the technology used but firms certainly should not underestimate the weight it carries.
Embrace external solutions and innovate
Asset managers need to work with and embrace emerging external digital solutions, rather than feel threatened by it, as 80% of traditional financial services companies do, according to PWC. Additionally, only 31% of respondents to the Alpha FMC survey said they had engaged with fintech providers, yet more than 60% of respondents felt that the ability to surface data to digital channels was a key priority. If they can acclimatise to the new market awash with new solutions, they will be able to cement their position in it, rather than fall behind and potentially lose their clients and their stature.
Firms also need to upgrade or adapt outdated legacy systems if they want to ensure their place in the industry in the future. There are various examples of third-party digital solutions that can improve existing systems, meaning they don’t need to be ripped out and discarded - instead new technologies can be integrated into these existing systems.
FE’s suite of digital tools allow asset managers to display their funds in the best possible way, helping them achieve greater transparency, but most significantly, enabling them to keep up with the change towards a more customer-centric approach. The tools are easy to implement and are fully on smart phones and tablets.
Zurich International Life (ZIL), part of the Zurich Insurance Group, use FE’s Precision+ Digital solution to make their investment information and fund factsheets available across Europe, in a format that is user-friendly, and which best communicates their corporate proposition to their clients. It does so in a way that is visually impressive and is entirely on-brand.
They explained how FE’s digital solution has improved client engagement: “FE’s digital solution allows us to provide information on fund ranges, chart investment performance and host documents on said fund centre. By using FE Precision+ Documents in conjunction with this, we can host underlying fund managers factsheets and our own unit link fund factsheets, thus providing our investors with all the information they need.”
The wealth and asset management industry is undergoing a period of change, but it is key that firms focus on the right areas, such as improving client engagement and not solely on upgrading their product offerings. If the client engagement offering is not up to scratch, an investor may be deterred from even getting as far as viewing the fund or products. By remembering that millennials are the next generation of wealth and by shaping their offerings, whether it be through their websites or investment tools, asset managers give themselves a far better of chance of winning share of market against the competition in the future.
For more information on how FE Precision+ Digital could help you embrace the new digital age, please contact us.