Fund Forum: Technology and regulation still rule
06 June 2016 Berlin
Image: Shutterstock
Technology and regulation are still the two forces determining success in the asset management industry, and those that are adaptable will come out on top, according to Tom Brown, global head of investment management at KPMG.
Opening Fund Forum International in Berlin, Brown noted low interest rates, political instability, the upcoming EU referendum in the UK and elections in the US, saying: “We are living in a rapidly changing and unpredictable world.”
“All of this uncertainty is making investors nervous and making it harder than ever to manage money and harder than ever to run asset management businesses”
Brown segmented the issue of technology and digital disruption into three main areas: customer experience, operational efficiency and the way in which technology affects the actual management of money.
Many customers are using robo-advisory as “it’s user-friendly, accessible 24/7 and delivered at a much lower cost”, said Brown. However, the majority of asset managers are at a “relatively early stage” of development in this area, and are not necessarily focusing on becoming leaders in this space.
With regards to operational efficiency, Brown said: “The industry is under huge margin pressure. Anything to transform the cost model will make a dramatic difference.”
He also noted that blockchain technology has the potential to transform the business in “all aspects of back-office functions”.
Brown went on to discuss use of data analytics, machine learning and artificial intelligence in money management. Citing a KPMG survey, he suggested that 30 percent of hedge funds globally are already using advanced and predictive data analytics, while 60 percent say machine learning and artificial intelligence will become significant in the way they approach management.
The second major transformative force will be that of regulatory change, Brown said. The “political backlash” following the global financial crisis is easing and “regulators and policymakers are becoming more constructive”.
However, the industry is still in the spotlight and undergoing regulatory change. Specifically, ‘closet trackers’ and cost models are under investigation in several institutions.
Brown said: “Unless the industry really gets on top of product governance, I think the industry will suffer some damage to reputation.”
The pressures of technological and regulation in the industry are still very much present, and the industry is likely to see “a tremendous amount of change over the next few years.”
Brown concluded: “In this rapidly changing world, perhaps it is agility that will become the critical success factor for businesses in our sector.”
Opening Fund Forum International in Berlin, Brown noted low interest rates, political instability, the upcoming EU referendum in the UK and elections in the US, saying: “We are living in a rapidly changing and unpredictable world.”
“All of this uncertainty is making investors nervous and making it harder than ever to manage money and harder than ever to run asset management businesses”
Brown segmented the issue of technology and digital disruption into three main areas: customer experience, operational efficiency and the way in which technology affects the actual management of money.
Many customers are using robo-advisory as “it’s user-friendly, accessible 24/7 and delivered at a much lower cost”, said Brown. However, the majority of asset managers are at a “relatively early stage” of development in this area, and are not necessarily focusing on becoming leaders in this space.
With regards to operational efficiency, Brown said: “The industry is under huge margin pressure. Anything to transform the cost model will make a dramatic difference.”
He also noted that blockchain technology has the potential to transform the business in “all aspects of back-office functions”.
Brown went on to discuss use of data analytics, machine learning and artificial intelligence in money management. Citing a KPMG survey, he suggested that 30 percent of hedge funds globally are already using advanced and predictive data analytics, while 60 percent say machine learning and artificial intelligence will become significant in the way they approach management.
The second major transformative force will be that of regulatory change, Brown said. The “political backlash” following the global financial crisis is easing and “regulators and policymakers are becoming more constructive”.
However, the industry is still in the spotlight and undergoing regulatory change. Specifically, ‘closet trackers’ and cost models are under investigation in several institutions.
Brown said: “Unless the industry really gets on top of product governance, I think the industry will suffer some damage to reputation.”
The pressures of technological and regulation in the industry are still very much present, and the industry is likely to see “a tremendous amount of change over the next few years.”
Brown concluded: “In this rapidly changing world, perhaps it is agility that will become the critical success factor for businesses in our sector.”
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