Change demands speed and agility in the AM industry | KPMG | KY

Revolutionary change demands speed and agility in the asset management industry

Change demands speed and agility in the AM industry

Digitalization critical to enhance client relationships.

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Man surfing with a huge tide

To remain viable and competitive, the time is now for asset management (AM) businesses to demonstrate a true sense of urgency and agility as rapid advances in technology dramatically reshape the entire industry. Future success will require radically different ways of conducting business in a digital world.  This is one of the many insights generated from the Distribution in a digital era: Technology drivers for the asset management industry panel discussion, I participated in at the November European Fund and Asset
Management Association (EFAMA) conference in Brussels.

We are seeing some firms pursue an agile new approach. Yet in many cases, firms are replacing specific hard deadlines for innovation with flexible timelines that treat change in today’s environment as an endlessly evolving journey. Others have been forced to take a step back to reassess their strategy. Meanwhile, many firms are questioning the wisdom of developing multi-year business plans that today’s digital wave may quickly render obsolete.

We are reaching what experts call the point of ‘singularity’ – where artificial intelligence matches that of human intelligence. It’s predicted that computing power will actually surpass huma brain power by 2023. By 2029, the computing power of a typical $1,000 PC will be 1,000 times more powerful than the human brain.

Digitalization will be critical in enhancing and ultimately redefining the industry’s customer experience, positioning asset management (AM) businesses to attract, retain and grow customer relationships. Success will rely on meeting customer expectations for instantaneous, personalized digital interactions – from anywhere and at any time – within a secure and trusted environment.

Secondly, digital automation applied intelligently through the whole value chain will eliminate significant costs for the industry – one already facing immense pressure to reduce costs and improve efficiency. Digital automation will streamline processes and automate tasks to increase productivity, heighten accuracy and lower costs.

The future will be defined by the customer experience

The key to success on the client front will be understanding which digital offerings, services and products matter and then delivering on those client expectations, while reducing costs, complexity and client pain points.  Robo-advisors are infiltrating the marketplace and reshaping the customer experience, providing financial advice and product offerings. Their growth has been limited to date, as clients continue to expect human involvement in their financial dealings. Given such concerns, this segment of activity may adapt what I call a ‘cyborg strategy’ – one that combines elements of human and machine interactions. 

A pressing need to drive down costs and improve efficiency

We see a remarkable amount of inefficiency today among AM businesses that continue to rely on paper documents, manual labor and dated processes. The opportunity for digital technology to entirely reshape business operations – improving efficiency and lowering costs to improve competitiveness and profitability – is absolutely unprecedented.

Part of the improved efficiency continuum will involve the application of ‘digital
labor’ in the form of robotic process automation (RPA). RPA offers the ability to automate and optimize many of today’s manual processes and operations. It will also play a key role in generating crucial data and analytics capabilities. Quality data used to improve cost efficiencies and generate alpha will also make firms more agile in identifying and responding to customer needs and expectations.

Fintech offers a fast lane to advancement and new models

Fintech players are rapidly developing smart new business models and innovative offerings. These bold new players springing up from outside of the established industry are unconstrained by traditional thinking or bureaucratic methods.

In many cases, the spirit of competition is giving way to one of collaboration and entirely new alliances between innovative Fintech start-ups and established AM businesses. Given the current state of the industry, these new alliances will no doubt continue to unfold. The truth is that AM businesses in general lack the agility, skills and technology they require to keep up with changes engulfing them. Fintech firms offer a fast track to change.

CEOs should be agents of change in solving today’s critical challenges

Many organizations continue to face massive challenges in overcoming organizational complexity, cultural inertia and fears about radically transforming their businesses. CEOs and senior leaders need to assume a more-informed and proactive approach, becoming agents of change for their businesses.

Tomorrow’s winners will be positioned to meet customers’ digital expectations, while optimizing costs and efficiencies through automation. This journey is transformational, demanding businesses to rethink their entire operating model. Welcome to the new normal. There’s no time to lose.

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