The landscape prior to/during COVID-19:
The digitization agenda was already a clear priority before COVID-19, but now its importance has been significantly escalated:
- Fund managers were already increasingly moving data and processes into the cloud, while digital technologies – such as AI and machine learning – have begun to prove their value at the largest firms and can be expected to be gradually be adopted across the sector
- Nevertheless, the industry has been slower to adopt new technologies than many other sectors
- The emergence of COVID-19 did not change the importance, but rather it quickly sharpened minds and added urgency to the technology agenda
- Those without efficient and effective digital data platforms quickly realized their ability to operate was being constrained
- Efforts to run operations in a more decentralized environment during the lockdown only accentuated the urgent need for change
What will the New Reality look like?
COVID-19 has been an awakening. Most asset managers had convinced themselves they had time to catch up on the digitization agenda. Now, many know they must expedite their timelines. What would have been implemented by 2030 we believe will now need to be achieved by 2025.
- Increasing numbers of fund managers will work with the bigger technology providers and the large industry platform providers who offer scalable processes and tools to the industry
- Internal capabilities will be rapidly built out – Cloud enabled digital capabilities will be accelerated
- Automation and artificial intelligence will proliferate, as fund managers look for tools and technologies to enhance digital channels and improve the investor experience – such as collaboration tools to better connect employees to clients, each other and the enterprise
- Mid-office and back-office processes – regulatory, trading execution, treasury, finance, risk and compliance, for example – will be reimagined and redesigned in order to enable the future business and operating models
- However, at the same time, we expect the big tech players and asset management platform providers to begin delivering many of these processes as a service, allowing most fund managers to refocus on their core differentiators.
- The most aggressive and innovative fund managers are likely to see this as an opportunity to fundamentally reinvent the alpha generation process. They will be looking at innovations in AI, IoT, 5G technologies – as well as emerging technologies such as edge computing and quantum computing – to uncover new ways to gain trading advantages over their peers and competitors
- End to end platforms are likely to evolve to service the entire investment value chain from front to back. There will be an evolution of the App market place where market data providers, risk analytics providers, ETPS & other point solutions will integrate with the platform - asset managers can utilize this platform to monetize their tech / data assets
What do organizations need to consider?
- Middle/back office processing – are you enhancing middle and back office processing and support to drive operational scale and efficiency and reduce expense?
- Intelligent automation & emerging technologies – can you accelerate the implementation of automation at scale through a re-evaluation of process workflows and increased use of innovative technologies? Do you have a strategy to introduce other technologies such as quantum computing to run simulations for individualized multi-asset portfolios, or NLP to read analyst/press reports and data from other non-financial sources to augment portfolio managers’ decision making?
- Cloud – what old technology can you decommission and move to cloud from a systems, software and/or application perspective?
- Digital interactions – these will be key and increasingly expected by clients. How are you planning to develop or acquire new digital capabilities for investment advisors and relationship managers? Personalized ‘nudges’ and customised calls to action will become steadily more widespread
- Data signals – are you investing in new capabilities that allow the early gathering and mining of external signals (economic, social, regulatory, legal, geo-political etc) to predict new dynamics and gain a competitive advantage?
- Cyber security – increased digitization, as well as more decentralized working, could increase cyber threats. Do you have sufficiently robust protocols, are these being reviewed and updated for the new environment that your business is moving into?
How will you become masters of digital and gurus of data?
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