Innovation in Asset Management Is Finally Happening - See What's Going On

Published on Feb. 05, 2019

Up until now, Asset Management has been a particularly stable industry. But things started changing a few years ago and there’s no denying anymore: Innovation in Asset Management is finally happening

It’s not just an Asset-Management-thing, of course. With the Amazon-ification of the world, no industry seems to be safe. Because Amazon is not just a huge marketplace, it is so much more. In just over 20 years, this company has changed the way the world works. 

Nowadays, and mostly due to Amazon’s policies - 

  • The customer is absolute KING. Clients have more control than ever, and companies that don’t follow this rule will eventually be replaced.
  • Technology and innovation are crucial. Customers demand it, businesses need it, and oil isn’t the scarcest resource anymore. Developers are. 
  • Thanks to automation, there’s been a cost reduction, both for companies and customers. Transparency is more relevant than ever. 

Amazon changed the industry, and everyone followed after. 

So what does this have to do with Asset Management, you’ll wonder. 

Well, it has A LOT to do. 

Innovation in Asset Management has come in many ways - 

So the customer is now king

Amazon started it, and everyone has been doing its best to replicate their outstanding service. But it isn’t an easy quest. 

Due to the digital transformation the world has experienced, customer-centric companies are now the leading companies. Digitization has given the client more power than ever. 

There are many things that have empowered clients. To name a few:

The rise of social media

Asset Management is not a “sexy” industry. You are not selling trips to the Seychelles or the trendiest smartphone in the market. But you’re handling your clients’ assets. That’s far more important than a weekend on a remote island. 

The use of social media is key in asset management innovation, and we don’t just mean publishing a few pictures on Facebook. Social media is a great tool for internal and external collaboration, monitoring customers’ sentiments towards a specific service or developing trust. 

It is also an excellent customer service channel. In fact, 42% of millennials (those born between 1980-2000) would prefer never to call their bank. If they could, they would manage everything through an app, an online platform or their social networks.

However, asset managers still have a long way ahead: only 31,7% of firms are available through social media. Social networks can be scary for corporations, because it can be hard to maintain control over thousands of users. However, they’re a channel you can’t ignore. And since you have to be there, you better get the most out of them.

Mobile access

This is extremely related to the previous point, although mobile is so much more than just social media. Mobile is key when we talk about innovation in asset management.

However, Wealth and Asset Managers have taken their time to innovate. We are talking about an industry that values close, face-to-face relationships with clients. Overcoming that point of view has not been (and is not) easy, but Financial Institutions realized a few years ago that, in order to survive, they didn’t really have a choice. 

Well-designed apps are a great tool to keep in touch with your customer at any moment, even after all your employees have gone home. With mobile apps, as well as with web platforms, you can reduce costs by making the client “work for you”. 

They’ll be able to check their portfolios or hire new services without making any calls. It’s a win-win situation. Customers like being able to get what they need on their own and you’re giving them the independence they were craving, while you reduce costs. 

Technology and innovation are a must

We already talked about what a robo-advisor is, and about how they will never fully replace the human financial advisor. 

However, automation can be very helpful, both in middle- and back-office processes. It helps asset managers reduce costs and increase their margins. 

Robots are key in Asset Management innovation. They help employees automate repetitive tasks (such as typing data from one spreadsheet to another. Seriously - who wants to do that?). 

In some cases, employees might see these changes as a threat. But they shouldn't. Automation will indeed reduce the time we spend on certain tasks, but it’ll also let us be more creative and focus on tasks that really add value to our firm.

Artificial Intelligence is coming

It is still very early days, though. AI and machine learning are disrupting every sector, but much remains to be done in the Asset and Wealth Management industry. In fact, according to a study conducted by Sapient Global Markets, 53% of firms say that they have or are planning a “limited” number of AI initiatives. 

However, we can assure you something: Artificial Intelligence is going to play a relevant part in Asset and Wealth Management innovation.

“Predicting the future isn’t magic, it’s Artificial Intelligence”

Asset Management is an industry that handles voluminous amounts of data. After all, asset managers need to store and analyze the data behind each of their clients' assets: Industrial goods, investment portfolios and so on. That’s a lot of information that firms must take care of.

Artificial Intelligence and Machine Learning are a great way of handling this information overload

According to a study published by Roubini ThoughtLab, some of the main uses of AI in Wealth Management and Asset Management nowadays are: 

  • Increasing the productivity of advisors
  • Improving portfolio management
  • Detecting and anticipating cybersecurity risks
  • Improving predictive analysis
  • Finding and attracting investors
  • Or creating automated financial advisors

(Take a look at the study if you want to find out some more. Also, AI is not the only trend in Wealth Management).

The importance of cybersecurity

Innovation in asset management is based, as most innovation nowadays, in data. Data is amazingly valuable, especially in this industry. And this poses a threat: security breaches can become a nightmare for Financial Institutions. 

Nate Hinman is Director of Plug and Play’s Cybersecurity program: “Wealth managers are unlucky in that they hold PII data on millions of people. As a result, they are often the most targeted by hackers - hackers go where the money is.”, he says.

A security breach could lead to fines of several millions of dollars. And not just that: your brand reputation would be damaged, too. 

That’s why cybersecurity should be a key point when thinking about innovation in asset management

Innovation in Asset Management is finally happening. Don’t be left behind.

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