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Of all the changes confronting asset managers, perhaps none has more potential to transform the industry than the rise of digital technologies. Today’s Digital Revolution is customer-led, rather than business-led, resulting in a shift in firms’ orientation, from selling a product to selling to a client. Creating this shift are digital technologies. Social media, mobility, analytics, big data and cloud have reached a level of maturity where, in combination, they are disrupting the ecosystem and putting traditional revenue and profit at risk.
While many asset management firms have moved to adopt digital technologies, few have effectively integrated them into the investment management lifecycle, confirming the fact that digital transformation is one of the central challenges firms face today.
In this report, we outline how asset management firms can undertake digital transformation—and do so quickly.
Download the full report [PDF, 22pp., 831 KB]
Pressure from a number of sources has intensified the need for asset managers to embrace digital transformation. While the asset management business has rebounded from its lows in 2008 and 2009, firms have had to cope with resistance to fees and commissions and the proliferation of low-cost alternatives, including exchange-traded funds, no-load funds and passively managed, index-based products.
What’s more, the role of the financial advisor has changed, with firms emphasizing asset gathering rather than commission-based trading. Thanks to real-time quotes on mobile devices and the immediate dissemination of financial news, asset managers no longer have exclusive access to market-moving information.
To keep up with these industry pressures, most asset management firms will need to undertake significant digital transformation.
The asset management landscape is changing rapidly. Firms now find themselves dealing with an array of challenging and interrelated issues relative to client expectations and distribution. Asset managers who wish to remain competitive, retain clients and advisors, and increase market share will need to evaluate existing business models and identify opportunities where they can become more agile.
Digital technologies are playing an increasingly important role at each phase of the investment management lifecycle, including in:
Developing products. The use of big data to monitor social media and track investor sentiment can support the development of new products that reflect changing investor demands. Analytics helps pinpoint changing demographics and demands within specific population segments and can be used to test ideas.
Generating demand and selling to clients. As the cycle moves into the phases related to generating demand and selling to clients, the use of digital technology will depend upon the firm’s chosen strategy. For instance, a model based on self-service and low-cost options emphasizes the need for mobility, interactive solutions and analytics.
Growing the relationship. Social media and big data analytics can uncover market sentiment that may affect investment decisions, prices and trade volumes. More robust predictive analytics supporting “what-if” analysis can forecast impact to fund performance by new combinations of strategies or fund managers.
Servicing the client. To optimize the potential of digital technologies, asset management firms should concentrate on end-to-end solutions that streamline and automate as many processes as possible.
When it comes to digital transformation, asset management firms should place an emphasis on taking the right action rather than just taking action.
For asset managers, building a stronger digital brand presence may consist of:
Establishing a consistent message and voice for the firm.
Setting digital priorities, using analytics to identify channels with the greatest potential impact.
Listening to the customer through social media and other channels.
Fine-tuning the customer experience to enhance ease of use.
Successful digital transformations will combine a well-thought out operating model with a flexible IT and data infrastructure, providing the foundation for effective use of technology at every phase of the investment lifecycle.
May 15, 2014
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