Time for fresh thinking for the funds industry?

By Jon Willis | 6 May 2015

Today’s consumer is heavily influenced by smart technology and the power of marketing suggestions. Can the funds industry adapt to these challenges and will it be fit to serve the investors of the future?

The funds industry continues to keep scrupulously abreast of the issues it faces: namely regulation, distribution, value chain alignment, platform developments and product diversification. The focus of these discussions, however, tends to be about the marketplace of today. If we look to the funds industry tomorrow, how many of these issues will still be relevant? Will the funds industry be fit to serve investors of the future regardless of what generation they belong to? 

Smart technology and intelligent marketing has transformed the decision-making process of today’s consumer.  Whilst the retail and services industries have enthusiastically embraced the technology revolution, the financial services industry has lagged behind. The retail industry, in particular, has recognised the sales, growth and product development potential a well-designed platform has to offer. Additionally, retailers have also invested heavily into understanding, analysing and exploring customer data in order to drive service and sales strategies. As a result, offers are tailored for customers, recommendations of other products are suggested based on what types of products similar customers purchased, and loyalty rewards are bestowed in order to create customer loyalty.  

‘Likes’, recommendations and product reviews are what drive consumers nowadays to ‘buy now’. The point is to generate a sense of trust over the internet. If consumers can electronically read reviews and ask others for their opinion, they will feel enabled to come to a faster decision. 

One would think it should be relatively easy to sign up for an investment product with the advent of smart mobile technology, empowered by real-time information. It is extraordinary to consider, therefore, that today it is easier for the UK population to obtain debt than it is to invest in a savings product. Should one-click debt, with loans approved in seconds be the norm in our under-saved world?

Millennial choice

The next generation of ‘Millennials’ tend to work at a much accelerated pace, with rising purchasing influences that can be seen in the relative success of some investment products today. Engaged consumers translates into engaged investors. 

The next generation can multi-task in ways unthought-of 25 years ago. Checking bank accounts on-line, making instant payments, adjusting the temperature, making sure the lights are turned off at home and checking live video feeds of their pets can all be done in a lunch break through the use of one single device.  

Likewise, short, medium and long-term financial decisions will also be made from a single integrated stream of apps and social information, all at a single swipe. 

A brand’s demise?

Branding, in the world of the fund industry, was at one time considered paramount. Investors used to care about which firm they entrusted with their hard-earned cash and in response ‘star’ fund managers were paraded and billboarded. For the ‘Millennial’ customer, peer review and performance will drive the investment decision-making processes, much, much more than brand. It will be of a case of the investor attracting the brand, rather than the brand attracting the investor.

A recent example of this is Tianhong Asset Management Co teaming up with the Alibaba Group to launch a money market fund. Customers flocked to the fund through the easily navigable e-commerce site and, within nine months, it had attracted more than USD 81 billion from tens of millions of investors.

It’s a new dawn

Not so long ago, the funds industry was questioning the need to automate transaction processing. The next generation of investors are posing challenges that could overhaul the entire structure of the fund management industry. Reducing cost and risk and meeting regulatory requirements are items that will always remain high up on the agenda, but ‘better serving the end investor’ has to be the ultimate goal.  Survival of the industry depends upon it.   
 

By Jon Willis, Chief Commercial Officer, Calastone

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