The asset management industry is not progressing quickly enough towards digital and in particular, is not exploring the potential of technology in the areas of sales and distribution, the FT reports.
According to the FT, the slow movement into the digital age by the asset management industry was called “glacial” by Amin Rajan, chief executive of consultancy Create Research, which published a report on the topic in February. “There is a lot of talk, but little action. Change comes at a glacial pace,” said Rajan.
The changing environment is a concern for the industry and although asset managers are anxious about the disruptive potential of technology, many companies are not making changes quickly enough to keep up with new competitors such as Chinese asset manager Yu’E Bao, the money-market arm of Alibaba which has gathered assets of over $90bn in two years.
Neil Curham, director at Alpha Financial Markets Consulting, told the FT that he is seeing two speeds at which changes are being made: fast changes because of the current fast-paced environment and slower changes in terms of working with clients to make transformational changes.
Curham believes that asset managers should be focusing on frictionless servicing, transparency and customer interaction via channels without intermediation, to create an advantage in the digital world, referencing Dutch investment house Robeco, as a company which is already focusing on these areas.
When Robeco was faced with regulatory changes that banned commission payments to financial advisors it had to enhance its direct sales channels by adding new ones. The investment company also offers its retail customers a mobile app - which now has 38,000 users - that can be used to create an account linked to a bank account and enables users to make transfers from the account into fund products based on their risk profiles.
In the UK, asset management companies have so far only used digital in the area of advice, with Aberdeen Asset Management hoping to become a leader in this area, the FT reports. With the help of former head of Charles Stanley Direct, Rob Hudson, the company is aiming to enhance its digital offering in the next few years.
According to the FT, the US has seen an increase in tailored profiles which are being created by online tools that guide new investors though algorithmic processes to identify their goals and risk profile, alongside robot advisors.
The work usually undertaken by asset managers is also being challenged by new digital competitors such as Wealthfront in the US, a start-up which uses software to automatically make investments and financial decisions for its clients, and other companies such as Nutmeg in the UK, which is independent of asset managers but offers a range of portfolios that suit clients’ profiles derived from a questionnaire, that are attempting to sit between asset managers and clients, a concept which according the FT, asset managers are finding it hard to get their heads around.