Where does digitization sit on the asset management agenda?

Spurred on by COVID-19 and other prominent politically charged agendas such as Brexit, and climate change, we are witnessing an increase in development in data and technology. 

How is this transforming asset management? José Longrée and Christophe Wintgens from EY Luxembourg, discuss.

Reinforcing Asset Management with Technology

Asset managers have been forced to face head on substantial structural challenges in the industry. While the last 18 months have been unprecedented, it is anticipated that the next five years will be even more transformative than the past five.

As the industry attempts to recover lost revenues and navigate post-pandemic socio-political uncertainties, it also faces pressure from investors and regulators to focus on value for money, sustainable finance, all the while fees are eroded by stiff competition. Asset managers will emerge successfully if they are able to reorientate their strategies around their clients and reinforce this with powerful technology.

 “EY’s recent Future of Asset Management Study has an eye-opening take on the next five years for the industry. A really interesting theme unfolding from the research is the need to build client-centric digital solutions which strengthen asset manager/investor relationships. But, even though our remote way of work has increased access to clients, it does not replace the trust built over years of in-person connections. A challenge now for asset managers is how to serve clients virtually or digitally in the most value-adding way”, comments Christophe Wintgens, Partner, Wealth and Asset Management leader at EY Luxembourg.

The challenge to address clients’ shifting needs

New technologies, evolving market regulations and pressure from customers have all paved the way for crossing the boundaries of traditional business process outsourcing in asset management.

Asset managers have to find new solutions to meet clients’ expectations and offer them a much more personalized and intuitive experience at just a moment’s notice. Offering clients a high degree of automation and digital flexibility to bring end-to-end process efficiency should be a key part of the asset manager’s agenda.

 “There are a number of elements we believe will significantly strengthen aspects of client service. Automated data analytics can be used to monitor investor behavior and empower decision-making. Storing data in one single hub will bring in cost and time efficiencies. Simple, yet sophisticated digital reporting mechanisms can facilitate real-time updates to investors, intermediaries and regulators”, adds José Longrée, Partner, Managed Services Leader at EY Luxembourg.

Although clients know what needs to be done from a technology point of view, many find it too challenging to make necessary investments while juggling day-to-day operations and costs.

The need for a ‘golden source’ data repository

Two-thirds of financial services CEOs expect to invest significantly in data and technology over the next 12 months, according to the EY CEO Imperative Study. Further, strong data and technology are predicted to be two essential elements of firm success. It is also becoming quite clear that there is an industry trend towards integrating technology with one single “golden source” of data.

 “Whether asset managers opt to insource, co-source or outsource, there is ultimately a move towards bringing all data needs under one roof. More and more we are finding demand for a tool or platform which gathers, saves and keeps all relevant data safe. Doing this considerably simplifies the role of the asset manager”, says José Longrée.

Finding the right balance between insourcing, outsourcing and co-sourcing

Bigger organizations often choose to develop digital capabilities internally, but this is not always an option for smaller players. Especially, after the pandemic hit, many incumbents have had limited resources and their boards currently spend a lot of time focusing on non-core activities. Here, managed services could be the solution for them.

With tailored managed services in place, boards have time to focus on their core tasks and make better, informed decisions to strengthen their position in the market. Managed services combine both technology-driven and easy-to-integrate solutions as well as relevant regulatory updates from the industry, enabling asset managers to achieve their goals and cut expenses.

 “When asset managers build their agenda, it is important to remember that regardless of what digital transformation their firm embarks on, it requires more than technology alone – good data management, trusted advice and collaboration with reliable partners are all ingredients to a successful digital solution”, concludes José Longrée.

This article has been published by Luxtimes.