Technology is helping the retail investing side, but institutional asset and wealth management is not as eager for the leap

Asset management and wealth management is shifting from product-driven to being portfolio-driven, according to a panel at the Global WealthTech Summit 2018.

Over the course of last year, the WealthTech space raised over $3.5bn around the world, according to data by FinTech Global. However, in terms of the asset and wealth management sector, it is the retail space which has received the lion share of interest. The panel at the Global WealthTech Summit, which included senior staff from EValue, UBS, BlackRock, Allianz Global Investor, Credit Suisse, discussed the latest innovations and challenges within the WealthTech sector.

One of the main take-aways from the event was that the ecosystem is rapidly changing and evolving, making it hard for financial institutions to keep up. UBS head of innovation Martin Meyer said that what he believes ultra-high net worth clients will still be using the client advisor for the next five to ten years, whereas, the retail segment is adapting away from this at a much more accelerated rate. Technology developments are helping the bank to adapt how they offer advice and how they do business, but also potential alternatives. For example, one thing it has noticed is a desire of the younger generation and using their money to impact the world in a positive way.

The client side still has some reservations around the use of technology and digital robo advisors, Meyer said. In a recent test conducted by the bank, it created a digital avatar which had access to investment advice of a large amount of data and analysis and put it in front of a room of its clients, he explained. While the technology had access to much more information that any human would be capable of, the response was not optimistic.

He said, “What was the outcome of this exercise? The client didn’t like our virtual Avatar because there is an uncanny valley. The lips are not synchronized to that what it is saying, and you’re distracted by his lips. Because they were so focused on what this Avatar was doing wrong, they didn’t realise what he spoke to them about. So, we are not at this point today that we have the technology to support our client advisors in a client meeting room properly.”

Being distracted by the robot itself speaking might not be the only reason digital solutions have yet to make their mark on the institutional side. Meyer stated that a lot of investment managers like to have the option to speak with other people to voice their concerns around decisions, making client advisors as much of an ‘emotion manager’ as a banking partner. There are clearly some barriers with technology for many institutional players, but this is only going to be a short-term problem. Technology is evolving at such a rate that challenges facing the market at the moment could all be gone within just a handful of years.

The evolving nature of the asset and wealth management space on the institutional side was reiterated by BlackRock CFO Tom Wojcik. He said, “The world is really shifting in the asset and wealth management space from a world that was historically very product-driven to a world that’s much more portfolio-driven. So, having the appropriate risk analytics tools, computing technology, the appropriate ability to take in all of the inputs around our industry, and build portfolios.”

BlackRock is helping to support the changing needs of its institutional clients by providing an end-to-end investment solution to investment managers through the Aladdin solution. The advisor is used by more than 25,000 professionals and is supplying them with processes for trade execution, investment operations, analysis and risk management and portfolio management.

Clients are the ones which drive success and following their needs and desires is the only way companies can succeed, especially with the high level of competition now flooding the market. However, technology and what consumers want are ever-changing, so all an institution can do is ensure they are flexible enough to change with the waves. There is no way to predict what the market will look like in five or ten years. If a company chooses to stick with a single path, the odds are the world will take a different route and they may lack the capability of adapting, unless they have another heavy reshuffle.

Wojcik said, “The biggest risk that faces the asset management side of the industry is complacency, or the belief that the things we have or the things we’ve built over time, are the things that people want today, or the things that they’ll need in the future. I think any good and appropriate strategy has to take into account the fact that those needs are changing and the world is changing fairly dramatically in terms of the way that people want to consume investment product and investment solutions and, and the goals that they’re ultimately looking to achieve.”

Going global

The audience of the panel were asked the question ‘To what extent are successful business models global versus local?’ Just under two thirds of those present indicated that having a local strategy is much more important than taking the standardised global view. This thought was echoed by the panel, which generally agreed that while their businesses are operating on global scales, it’s important to tailor certain aspects to different areas.

While working on a global scale, which can have multiple different core systems, it is still necessary for all of these to be able to interact with one another. Going further, it’s very important that each system integrates correctly with local jurisdictions, understanding the values, opinions and preferences of each.

Allianz Global Investor CIO Lucy Macdonald said, “We are in a global company, we have got new clients and investors around the globe, and then we are investing in companies around the globe, so it is a very global business. However, investors need to understand exactly what’s happening within the local countries. So, you need both and that’s why it is so complex. But increasingly the technology that we are using is bringing us closer together.”

“One thing we are using is Salesforce Chatter, which is bringing all of the investors into one global conversation which is sort of going on 24/7. That has really brought everyone a lot closer together, so feeling like it is one global conversation and decision trading is very transparent in what is happening.”

Having a global business which is comprised of a range of differing operational methods all connected internally was believed to be the best way for a firm to work. Financial institutions have changed drastically over recent years, even if it may appear that they’re stuck with their old methods and legacy systems. Institutions are now much happier to partner with other companies and work together rather than going it alone.

Credit Suisse COO Simon Politzer said, “The collaboration internally is key if you’re serving global clients. Often we’re serving local clients, but then we will be looking at clients that then need to do things in other jurisdictions themselves. To be able to serve that client seamlessly from multiple offices, locations, teams around the world is a real value add for the client and for the firm. So that means that a global approach to collaboration is really important.”

Copyright © 2019 FinTech Global

Copyright © 2019 FinTech Global

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