At such an interesting time in the asset servicing industry, in terms of emerging digital technologies such as robotic process automation (RPA) and artificial intelligence (AI), there is certainly room for many different approaches and opinions, making this year’s FundForum Berlin conference extremely fascinating.
Despite the variety of attitudes towards technology, the key message that gleaned from the conference seemed to be to embrace change.
While some delegates at the conference seemed to be wary and untrusting of technologies such as AI, feeling concerned that it is going to take jobs from the human, some viewed it as a positive because of the removal of repetitive and monotonous jobs—it seems that it depends on how you look at the situation.
Reinforcing this message, one speaker from a panel discussing technology said that the industry should “embrace change”.
The panel discussed a new perspective on big picture digital transformation to drive business growth and maximise efficiency.
The panellist added: “I have learnt so much about different ways of doing things. The attitude to change and the attitude to embracing change is fundamental to how some of the innovative companies operate.”
“This is not just about technology; it is about methods. Embrace the change and move towards a future that is certainly possible driven by technology. I recognise that certain industries are not willing to make those kinds of decisions just yet.”
“You can learn an awful lot from other industries but what I have learnt is that change is good.”
The panellists also discussed how to drive the value out of new technologies while still building day-to-day business, and were asked whether or not companies should spend a huge amount of money on new technology.
One speaker remarked: “Only 6 percent of companies have made financial impact from their digital investments,” and encouraged delegates to “look through the technology into the capability.”
The speaker advised: “Good companies are listening to the clients, looking at trends, channel insights, and tapping into social media. And, all of these aspects are possible with new technologies.”
Meanwhile, in another panel, one panellist said that RPA should be seen as an opportunity and not a threat.
The speaker commented: “Robots are seen as a threat, and this is not always the case. It does require a different mindset in general and a change in personale. Some people are really happy with their robots, but this requires a change in mindset—see it is an opportunity and not a threat.”
Specifically, the panel discussed the best practise in how machine learning and robotics is transforming key back-office processes.
It was noted that with increasing pressure on margins due to a never ending regulatory avalanche, as well as strong competition from disruptive new entrants, financial institutions need to reinvent themselves, be smarter in the way they work and turn their labour cost-cutting strategies into process efficiency strategies.
In this context, the emergence of RPA and digital labour represent significant opportunities for market players in the future.
Beginning the session, the moderator asked the panel if there were any characteristics of process that the panellists were specifically looking for.
One member of the panel replied: “From a technologist point of view, selection needs to come with the business, and it should be business led in terms of understanding value. Understanding factors such as scale, risk, and compliance is important. In this process, a business can start small and simple and then think about bringing it up from there.”
On day two of the panel, Daron Pearce, CEO of Europe, the Middle East and Africa asset servicing at BNY Mellon, reflected on some of the key themes and messages from the day prior in his chairman’s state of industry address.
Pearce said: “The message for me was if you don’t embrace technology then your business will fail. Many organisations now are investing in that technology and embracing it to enhance their business models in order to improve investment performance and to create the right investment products for their clients, and to improve their client experience, so those components in using technology are going to enable organisations to win.”
The second Markets in Financial Instruments Directive (MiFID II) was a particularly popular topic on the second day of the conference.
Over the last six months post-implementation of MiFID II, most asset managers “thought that they had done ok” but asked themselves how they could improve in the future, said one speaker in a panel.
The panel session opened with the moderator asking the panel, how do you value, measure, monetise, and research data?
One speaker suggested: “It became very apparent that the industry was too challenged by MiFID II. The data management side of things is a significant challenge for those in the industry. MiFID II was delivered to deliver transparency costs amongst other things.”
However, costs are escalating day by day and that isn’t good for competition in the long run, one speaker noted.
Discussing costs, a panellist said: “The industry is highly dysfunctional and when you start to acknowledge what you have to pay it then becomes quickly obvious to think about how to change this industry into one that has a sense of efficiency about it.”
“If it is efficient then you can lower costs. Approach to this is going to have to be one of innovation. We are going to have to change the landscape.”
The panel were also asked where they were seeing changes, to which one speaker said there has been a rush to try and make those changes as fast as possible.
Nobody has been totally keen to see change take place, and nobody really wants to be transparent about anything at all. Thankfully that has now changed—it forces people to look for solutions, the panellist said.
Another panellist warned: “Mistakes will be made. Most people are making best efforts. Compliance is a big challenge. Undoubtedly, MiFID III is coming, we don’t know when or what it will look like.”
Meanwhile, in another panel, panellists discussed German market distribution six months on post-implementation of MiFID II and Packaged Retail and Insurance-based Investment Products (PRIIPs).
An issue surrounding this was that many foreign asset management funds were stuck with not being able to sell their funds outside of Germany, one speaker noted.
One member of the panel said: “Banks develop a distribution strategy and there are smaller international fund providers who still struggle with providing the right data. In the end we have a good set up. The regulator ultimately wants to have more transparency.”
Another speaker added: “Regulation pushes us heavily into an automation because all of the reporting that we are obliged to do that needs to be automated, and that is one of the big achievements of regulation.”
However, advice doesn’t come without cost, one panellist warned.
Elaborating, the panellist explained: “The most important factor is to have correct and clear data. MiFiD II pushed the trend regarding service free models and so this is why we have seen a cloud trend.”
“My advice and hope is that there will be a focus on products that are really relevant to the market so that we do not as a whole industry end up with a large mass of data processes.”
In another panel, one panellist argued that MiFID II is the “most fundamental regulatory change in its existence. Asset managers are in the spotlight and the expectations of the level that they operate on is much higher”.
The panel discussed how COO’s deal with implementing transformation across single and multiple technologies and businesses. They also discussed the best practices in dealing with the responsibility and oversight of implementing transformation to enable future growth and agility.
Some of the main challenges revolve around digital, with one panellist arguing that the industry is still grappling with the challenges around it.
“They are trying to work out how to interface with the customer in a heavily regulated environment”, the panellist added.
Another panellist saw challenges being mainly cultural, arguing that delivering transformation is a difficult and complex task. “Cultural change is an extremely difficult challenge to overcome”, the panellist said.
One member of the audience asked: “What does a world class COO look like in five to 10 years?”
“The role of COO in asset management industry has shifted to understanding who our clients are and what they expect from us. Indeed, there has already been a quantum shift. There will be a lot more around the ability to build relationships”, one panellist replied.
One speaker concluded: “We [the industry] need to combine the old with the new. For example, in wealth management there is fantastic amount of financial technology happening. However, we still need old skills. Having that personal agility and that narrative is going to be very important to the future.”
