We all agree that the new wave of disruption will shake the asset management and wealth management industries up. And we can certainly agree that no-one is 100% sure on what that means. But take it from Gaelle Drory-Liaudet, Senior Director at Anthemis, you shouldn't shy away from it. We talk to her about how you can embrace it and what it might mean for you.
What is the next wave of disruption in wealth management and financial services, and how can you take advantage of it to deliver value to your customers?
Disruption in the asset management and asset servicing arena has significantly evolved in recent years, but it hasn’t reached its inflection point. Changes we have seen in Robotic Process Automation (RPA), Blockchain and Cognitive Systems will continue to have a deep and lasting impact on the operations of various service providers. At Anthemis, we believe that digitally enabled firms have greater capacity to focus on connecting with and providing expertise to clients in a more meaningful way. By optimizing their use of technology, wealth managers will increase their ability to survive in the digital economy and meet client needs more effectively, they will also address the need to decrease risk, improve transparency and deal with compressed fees in new ways.
Additionally, rating agency Moodys, as well as many CEOs of asset managers and financial services institutions, are expecting a second wave of industry disruptions to come from the tech firms such as Apple, Amazon, Google, whom can disrupt, initially with their strong distribution channels. These tech giants could enter the asset management industry not just for investment management fees but also to enable data collection and keep their clients within their companies' business ecosystems. Digital payment firms like PayPal, which have large user bases and are seeking new revenue streams, could benefit from offering investment funds. The asset management industry has already seen digital disruption in China. In 2013, an affiliate of Alibaba launched Yu'e Bao, a money market fund for its digital payment system, Alipay.
Looking forward, players such as Blackrock and Fidelity who have been identified as the frontrunners for embracing innovation, have taken the lead and are heavily investing in and shaping their innovation strategy. Blackrock has developed a risk management platform (Alladin) and is making its fundamental investing more quantitative. They also have acquired and invested heavily in their financial technology capabilities to cater for the demands of their current and targeted customers. Additionally, they have announced that a number of active equity funds would be replaced with alpha-driven strategies, which ultimately result in manager displacements.
As an asset manager or wealth manager what should you do next?
Don’t shy away from innovation and embracing technology. Instead, see this as an opportunity to leverage greater efficiency, customer retention and competitiveness. As the Information Age matures, we see the rise of the Robo Advisory / Robo Hybrid; algorithm based advisory services. As early movers in financial technology, we invested in Betterment, a category creator of the space back in 2011. Over time, we have seen that Robo Advice has added a democratizing element to wealth management, by providing diverse choices of products and allowing incumbents to be more competitive. These disruptive technologies will shape the future of asset servicing and offer huge potential in creating efficiencies, reducing risk and improving quality of service to clients. Furthermore, incumbent institutions, will increasingly look towards partnering with start-ups to help advance their speed to market, increase their appetite for long-term digital investment, improve their ability to attract engineering talent, and strengthen their core competency (investment acumen vs. consumer software).
Distributed trust and the customer - enabling the convergence of financial services to happen and open new opportunities for third party providers?
One of the biggest changes powering transformation in the banking sector is Open Banking, and in Europe specifically that change is accelerated by the adoption of PSD2 regulation. We will begin to see a much more distinct and modularised market on the horizon, with new companies specialising to offer very specific components of banking services or products. Open banking could lead to the rise of platform models for banking where banks would act as market intermediaries connecting customers, manufacturers and distributors. Personal data, compliance and the overall customer engagement and relationships models are yet to be endorsed.
What’s more, from a consumer perspective, there remains a concern regarding how personal data is being managed new market players, and if the same safeguards will be made available as those provided by incumbents. This shift however will allow third parties to gain the consent of consumers and access to their financial data to provide new, innovative digital and more competitive financial solutions.
Importantly, trust and customer centricity is at the core of the ever evolving business models, which includes additional cultural and cognitive diversity components as a means of increasing breadth of perspectives and business resilience.
What does the new era of voice, AR, chat bot and behavioural economics for customer satisfaction in new wave of financial planning platforms mean for the industry?
All of these things are really new kinds of interfaces. The classic UIs that we’re all used to are largely form filling. Perhaps in more sophisticated cases, we chain a few forms together. But they’re still ultimately forms. These work well when we, as the human, know far more than the computer. We can craft our request, issue it and the computer can run around filling it in.
However as the capabilities of computers have dramatically improved, there is a change in the way we interact with them. Instead of issuing orders, computers are now able to act as assistive partners. A computer can work on a task in parallel, occasionally checking in. In this model, presenting a form to be filled in doesn’t really make sense, there’s only a small amount of new information that’s required, why a whole form? And what happens to the data that was entered last time?
The fundamental nature of the relationship is changing. And, in particular, the triggers for the interactions are changing. Instead of a human initiating and making a request, the assistant will increasingly be expected to initiate activities of value. The more sophisticated models for interaction, AR, behavioural economics, are thus about finding new ways to initiate. And new ways to continue to keep the human in the loop.