10 drivers of change for asset managers
The asset and wealth management industry is being disrupted by FinTech start-ups. EY finds that this is just another challenge among regulation, technology, changing client demands and fiscal issues.
In their report “The top 10 drivers impacting global wealth and asset management”, EY does not just see drivers of change in the asset and wealth management industry as threats but also as opportunities: Solving issues fast and being a first-mover allows to improve productivity and create trust. Leveraging technology will drive innovation and improve cost management, streamline processes or enhance client services. To gain a competitive advantage, asset managers must consider ten disruptive drivers challenging their industry:
- FinTech and innovation: Asset managers must quickly react to the innovative solutions offered by FinTech start-ups. Thereby, they must find new solutions to deliver their services faster, better and more cost-effective. All of which are opportunities to create a competitive advantage.
- Cybersecurity: Improving cyber security is the best way to safeguard the trust of clients and regulators by ensuring that their data is protected and by hindering money laundering and misappropriation of client’s financial data.
- Liquidity risk: The current low interest rate environment leaves investor’s expectations vulnerable to further liquidity shocks. Firms must ensure a solid liquidity risk management to gain investor’s confidence. Clients are increasingly focusing on what value is created by asset managers.
- Conduct risk: Delivering real value for fees is a primary enforcement goals for financial regulators. Firm must thus clearly display the highest standards of conduct to the market.
- Long-term conviction vs. short-term action: Firms must balance short-term profits and long-term sustainability. Therefore, EY advices asset managers to implement measures for long-term sustainable growth that enhances value for all stakeholders and thus question their business practices according to their long-term viability.
- Investment with purpose: Investors are imposing new demands on asset managers. Other than return and risk, many clients expect the money to be invested for the benefit of the society - or at least without harming it. Socially responsible investing or integrating ESG criteria into investment analytics is thus a trend to be recognised by asset managers.
- Focus on client experience: Asset managers need to abandon the product push model and start to build and leverage a core business model that primarily enhances the customer experience. Products must be build that meet the goals of investors even if they do not outperform the market.
- Simplifying the proposition: Firms must reduce complexity for all constituents. Intransparent products often lead to client dissatisfaction. Simple, clear and transparent is what investors demand when selecting products.
- Technology and strategic efficiency: Technology can become a key advantage for asset managers. It does not just allow to increase productivity but can also be leveraged to analyse client behaviour and improve distributions.
- Complexity of global tax reporting: Tax reporting is no longer a year-end procedure but has become a highly complex process involving data collection, validation, documentation, classification, and report generation and submission.