How asset managers can find clarity in the 'digital fog'

Most industry commentators see the move towards ‘digitalisation’ as a key trend in our industry. Is there any clear understanding of what this means though - and how to achieve it?

As business models within asset management firms start to evolve (especially those in the area of client engagement), it is becoming increasingly common to witness firms striving to ‘future proof’ their technology investments in order to support the perceived needs of the ‘digital world’. In many cases, however, this is a deeply flawed process with a set of generic terms and requirements that lack the vision and detail to be useful.

The most common phrase I hear from firms is the request for suppliers to provide a ‘portal’ as part of their application stack. This creates a whole raft of misunderstandings and confusion. I have witnessed cases where asset managers have contracted with vendors on this basis, only to find that when they subsequently engage with their clients, this does not match what they require.

It is imperative that asset managers engage with all stakeholders in advance of buying or building a digital platform, and are able to specify in some detail what they are trying to achieve and for whom. Most institutional clients will have a multi manager approach to their assets, and they are not at all interested in using multiple asset management portals in order to see the various components of their portfolio. Indeed a trustee I recently spoke with said that this was their biggest headache and that asset managers had not understood, and in many cases not asked, what the requirement was.

Investment management firms will require the ability to distribute digital information in different ways, depending on their business model and sector. For example, high net worth private client managers will have very different needs to retail firms. Active managers will have different digital needs to passive managers. Also marketing, sales and client relationship requirements within the same firm will vary. Customer engagement is a key element of competitive advantage and successful firms understand and invest in this area.

Currently vendors are being pressed into providing elements of their technology stack that are not suitable and will ultimately be redundant. It could be argued that these vendors should show more vision and leadership themselves, but many small vendors do not have the capacity or capability to take this visionary approach and will develop what the market asks of them. They also tend to take a short term, deal-by-deal view, without counter-balancing this with longer-term strategic inputs.

At the moment it appears to be an ‘arms race’ among asset managers in order to prepare for the new digital age, with a view to improving customer acquisition and retention. If this is done in haste, however (without the required vision, thought and impact analysis), it will have exactly the opposite effect.

This really is a time for firms to think and act smart. Asset managers would be advised to work with their technology and supplier partners to understand the needs of their clients today and intelligently model these needs in the future. In this way, asset managers can truly deliver capabilities that enable and serve the customer in a timely, accurate and transparent manner. Asset managers must challenge and validate their plans, not just rush forward with their blinkers on and then cast the blame upon the suppliers for not fulfilling their ill-defined needs.

The bottom line is that the provision of digital services is a key business issue that all asset managers must fully understand and define in order to flourish. Passing some or all of this responsibility on to vendors will result in failure.