Multifonds: Asset management industry to innovate from the inside
11 July 2017 London
Image: Shutterstock
Innovation in asset management will come from within the industry, rather than from start-ups or disruptors, according to a survey from Multifonds.
A survey of the asset management industry, conducted in March 2017 and including responses from asset managers, fund administrators, custodians and asset owners, found that 61 percent of respondents believe there is a threat of a game-changing disruptor coming into the market.
This is up from 54 percent that thought this was the case 12 months ago.
However, the survey report also noted that there is “considerable skepticism” around the ability for an outsider to enter and operate in the market, mainly because of the sheer complexity of setting up as an asset manager.
Regulatory compliance was also named as a barrier to disruptors by 69 percent. This was followed by back-office complexity, named as a challenge to start-ups by 33 percent.
Being able to offer appropriate investment products was considered a barrier to disruptors by 24 percent, while technology capability was, somewhat predictably, named as a challenge by only 14 percent.
The report said: “Getting up to speed in the post-2008 regulatory environment is therefore seen as the most difficult step to entering the asset management industry, and is potentially what has held off game-changing disruption that has been seen across so many other industries.”
However, some 92 percent of survey respondents said they think innovation will increase in the asset management industry over the next two years, and 47 percent said this increase will be “significant”.
The report said: “While the threat of external disruption seems a practical improbability, there is certainly increasing recognition that game changing innovation needs to come from within the asset management industry.”
When respondents were asked which technologies they think will have the biggest effect on the industry over the next two years, big data analytics, artificial intelligence and robo-advice came out on top, collectively accounting for 55 percent of responses.
The report noted that these are “all technologies which will make market research, product marketing and distribution more intelligent and efficient”.
In addition to this, 57 percent said they think robo-advice will benefit existing managers more than start-ups, compared to 30 percent who said robo-advice will benefit a start-up or disruptor more.
However, the most popular focus area of innovation in the asset management industry over the next 12 months was operational efficiency, named by 38 percent of respondents.
The report said: “Increasingly, asset managers are recognising the importance of seamless integration between the investor and the back office processes, which will be key if the industry is to realise its ambitions of accelerating both product innovation and extension into new digital channels.”
Keith Hale, CEO of Multifonds, commented: “Asset management is in the digital ice age compared to many other industries. Some players are testing the digital waters with direct-to-consumer distribution and robo-advice, but this is often window dressing on a model that is plagued with legacy issues.”
“The wider industry is now in a position where it must replace fragmented functions and systems with highly efficient processes using scalable modern technology, or risk being disrupted into the history.”
The report concluded that change is being driven from within the asset management industry, and it will be this, rather than any external forces, that will “most likely be the real game changer”.
It said: “This new era of innovation, powered by asset managers embracing a digital future, is driving forward an acceleration in product development, digital channels and operational efficiency.”
A survey of the asset management industry, conducted in March 2017 and including responses from asset managers, fund administrators, custodians and asset owners, found that 61 percent of respondents believe there is a threat of a game-changing disruptor coming into the market.
This is up from 54 percent that thought this was the case 12 months ago.
However, the survey report also noted that there is “considerable skepticism” around the ability for an outsider to enter and operate in the market, mainly because of the sheer complexity of setting up as an asset manager.
Regulatory compliance was also named as a barrier to disruptors by 69 percent. This was followed by back-office complexity, named as a challenge to start-ups by 33 percent.
Being able to offer appropriate investment products was considered a barrier to disruptors by 24 percent, while technology capability was, somewhat predictably, named as a challenge by only 14 percent.
The report said: “Getting up to speed in the post-2008 regulatory environment is therefore seen as the most difficult step to entering the asset management industry, and is potentially what has held off game-changing disruption that has been seen across so many other industries.”
However, some 92 percent of survey respondents said they think innovation will increase in the asset management industry over the next two years, and 47 percent said this increase will be “significant”.
The report said: “While the threat of external disruption seems a practical improbability, there is certainly increasing recognition that game changing innovation needs to come from within the asset management industry.”
When respondents were asked which technologies they think will have the biggest effect on the industry over the next two years, big data analytics, artificial intelligence and robo-advice came out on top, collectively accounting for 55 percent of responses.
The report noted that these are “all technologies which will make market research, product marketing and distribution more intelligent and efficient”.
In addition to this, 57 percent said they think robo-advice will benefit existing managers more than start-ups, compared to 30 percent who said robo-advice will benefit a start-up or disruptor more.
However, the most popular focus area of innovation in the asset management industry over the next 12 months was operational efficiency, named by 38 percent of respondents.
The report said: “Increasingly, asset managers are recognising the importance of seamless integration between the investor and the back office processes, which will be key if the industry is to realise its ambitions of accelerating both product innovation and extension into new digital channels.”
Keith Hale, CEO of Multifonds, commented: “Asset management is in the digital ice age compared to many other industries. Some players are testing the digital waters with direct-to-consumer distribution and robo-advice, but this is often window dressing on a model that is plagued with legacy issues.”
“The wider industry is now in a position where it must replace fragmented functions and systems with highly efficient processes using scalable modern technology, or risk being disrupted into the history.”
The report concluded that change is being driven from within the asset management industry, and it will be this, rather than any external forces, that will “most likely be the real game changer”.
It said: “This new era of innovation, powered by asset managers embracing a digital future, is driving forward an acceleration in product development, digital channels and operational efficiency.”
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