On February 4th, 2016, 200 funds professionals gathered at the European Conference Center Luxembourg for Warren's first event of the year, FundsEvent. For this 7th edition, the topic "Investments in 2030: what does the future hold?" was addressed by passionate local and international speakers who shared their knowledge and expertise with the audience. Geopolitical risks, thematic investments, and technology were at the heart of the discussion.
The second panel session of the day, moderated by Carlo Duprel, Director at Deloitte Luxembourg, focused on the impact of technology and customer centricity on the asset management sector. "Regulatory costs, technological innovations, but also demographical evolution are changing the industry distribution mode and competitive landscape", stated Mr. Duprel in his preamble.
A digitalizing sociological landscape
"Generational changes, from baby boomers to millennials, entail digital transformation", observed Carlo Duprel. "But how is this transformation impacting the asset management sector?", he asked. "Millennials are emerging as mass consumers for financial services and they are becoming a very important segment for wealth managers", answered Manuel Arrivé, Senior Director at Fitch Ratings' Fund and Asset Manager Group. "They are comfortable with on-line tools and they have a digital-centered lifestyle. They want to be in control, they want transparency, on-line solutions, and low costs".
The wave of web innovation and the emergence of new FinTech players are creating a much more enhanced client experience, introducing disruption through robo-advisory, algorithmic platforms for retail investors, and social trading platforms. These disruptive forces are shaking an industry that has been quite reluctant to change, compared to other industries such as entertainment or transport. "The question lies in the extent to which those disruptive forces will have an impact on the value chain and create a new ecosystem of players", Alexey Yeremenko, Head of Fixed Income, EWUB, pointed out.
Technology can help getting closer to the client
Client-centricity is one of the major driving forces behind the new FinTech actors. "Our current model is based on intermediation", said Maxime Aerts, COO of Fundsquare. "The new FinTechs shorten the path and give direct access to the products. While this is clearly good news for the investors, it is a challenge for the industry which must establish and maintain the interaction between these new tools and the legacy systems". In a context of increased competition, asset managers have to adapt to new technologies in order to acquire new clients and reduce costs.
Using Big Data in asset management
"Access to information is fundamental to active asset management", reminded Manuel Arrivé. "Humans are note good at forecasting but they can be helped by machines". A lot of initiatives are currently taken in artificial intelligence, machine learning and neural networks, even if these efforts are still experimental: "machines need humans behind them", he admitted. However, asset managers - and robo advisors as well - need access to the kind of quality information that Big Data can provide. "Today Big Data is used to ensure the quality and comprehensiveness of information at the beginning of the investment process", Maxime Aerts added.
Is blockchain the solution to everything?
The technology behind bitcoin is just beginning to be mined for use in a wide array of financial services. When asked if the fund industry was a good candidate for being changed by distributed ledger technology, Maxime Aerts explained that, due to some industry inherent constraints and model complexity, the systems were not ready for real time processing. "Today the fund industry has a cost but it works, it's efficient and scalable", he said. One of the key words when it comes to distributed ledgers is "standardization". But changing the models in Europe can only be made by organizations that have "the scale and scope to make things move".