2017 and Beyond How Asset Managers are Preparing for the Digital Future

The Asset Management Industry is grappling with a number of issues. A combination of the current low interest environment, alongside the digital tsunami, shifting demographics, new well-funded fintech players and the rise of robo-advisors, and it is clear the asset management industry is witnessing unprecedented levels of change.

While robo-advisory is a fraction of the market compared to overall assets under management, the industry is preparing for a much more competitive  future. That future is one of greater choice because “robo-advice represents the democratization of wealth management,” according to Dirk Klee, Chief Operating Officer at UBS Wealth Management. A number of larger firms, seeing the impact of robo-advisors like Betterment and Wealthfront are already responding by experimenting and making some serious bets around robo-advisory services.

The role of advisors will continue to play an important part in a hybrid wealth management model, particularly for high-touch asset classes. That means personalization and customer engagement will be one key to ensure growth. Indeed, Bob Reynolds, President and CEO of Putnam investments, believes it’s not about active or passive but how to make the investment goals personal to a client and personalize it for a customer (Source: Roubini Thoughtlab report on Wealth and Asset Management 2021).

Changing dynamics are also evident in the uptick in merger activities where technology platforms and scale are important to offer personalized customer services. TD Ameritrade’s recent acquisition of ScottTrade is an example where technology and robo-advisory services will help meet the evolving needs of customers for both organizations.

Technology has the ability to shape the client experience. With more palatable advisory fees and other cost-effective services across commoditized asset classes, technology can increase the global reach of wealth management firms as wealth is redistributed across global and emerging markets.  

Path to digital transformation

As 2017 approaches, the senior asset management leaders I speak to are  examining their transformation strategies and budgets to fund the path to digital. A consistent point of emphasis in those conversations is that one size does not fit all for any digital strategy. However, there are some universal themes that should be looked at as you plan for 2017 and beyond:

1. Establish a governance framework for enterprise digital transformation: One key to success is the development of an enterprise strategic plan for digital transformation. Each business unit, department and division within your company might be engaged in everything from mobile to cloud to creating a customer experience. However, if there isn’t an overarching governance framework tying those with your organization’s overall goals, you could have small short-term wins without meaningful long-term transformation.
   
   
2. Place the customer at the center of transformation: What you do for the customer is vital for digital success. Doing digital for the sake of doing digital, “I can build a mobile app for this”, without putting the customer at the center of your strategy will lead to minimal return on value.
   
   
3. Develop an omni-channel approach: As an asset manager you should be able to seamlessly meet your customer needs whenever and wherever the customer desires across multiple channels. These channels are not all digital, but you need a consistent, integrated experience from mobile, websites and down through to your call centers in order to drive loyalty. That includes self-service, the ability to look up and review portfolio holdings or instantly speak with an advisor. This is not only a generational requirement, “I will target the millennials”, but across all client demographics.
   
   
4. Support the SMAC (social, mobile, analytics and cloud) Stack: Asset managers, unlike some of the large retail and commercial banks, have less legacy technology and infrastructure. Moving from legacy, on-premise architecture to one that is open (Open APIs) , modular and agile to leverage the SMAC stack can offer the flexibility you need to deliver sustainable engagement.
   
   
5. Identify your own unique path:“Technology is making customization easier and cheaper each day” says Alexa von Tobel, Founder and CEO of LearnVest. The path to digital transformation is not one size fits all. You have to look beyond the market noise and hype about what a competitor is doing to see what fits in with your specific strategic goal and objectives.
6. Define a talent acquisition strategy: Asset managers have different strategies to target talent. For example, UBS has decided to build talent in house and create  “digital garages”. Others are looking at third party partners and startups to get the scarce talent, while some are tapping into academia to build a pipeline of the future.

Digital is leveling the playing field for asset managers with lower barriers to entry that empower new, nimble competitors to take market share. At the same time client demands are changing as they expect similar experiences to those they get when interacting with the rest of the digital world. For traditional firms, going digital is not without challenges, but to do nothing is not an option.

Welcome to 2017. Another year of constant change and disruption!