Asset management industry at the cusp of transformation

Covid has ended the dream run of more than a decade of continuous growth for the asset managers. In fact, even prior to the onset of Covid, a sizable chunk of the asset management industry did not regard lack of digital capabilities as a major threat to the business, definitely not a pragmatic view of the business. The industry has traditionally relied on the face to face contacts for driving business, however in the wake of Covid, highly digitalized operations will be table stakes for any company. The downward pressure on the portfolio management fees is also not helping the matters. The asset management industry is also facing immense cost pressures; the costs in absolute terms grew by 4% in 2019 for the global asset managers, twice the rate of absolute revenue growth. Apart from the increasing costs, asset managers themselves expect the average fee margin to drop 11% between now and 2025. Asset managers also rely heavily on paper-based processes that especially harms the client onboarding experience; first the data is not collected and stored in an efficient manner and on top of that consumers are asked same information multiple times across variety of touchpoints. Given the high expectations of consumers, the sub-par customer experience will only lead to higher abandonment rates. In the light of all these legacy problems, asset managers need to seriously action a transformation roadmap with consumers at the centre of all strategic deliberations and calculations

Here are a few ways for the asset managers to transform the business for sustained growth:

Increased digitalization is vital not just for efficiency but the very survival: As per a Deloitte survey on leading asset managers across Europe and North America, just 25% of the firms were able to grow profits consistently. These successful firms spent more on technology as a percentage of revenue compared to counterparts with shrinking margins. Increased use of technology was also linked with higher revenues per employee implying that higher level of digitalization leads to rightsizing of operations. Post Covid the digital acceleration is no longer a choice but a key imperative to thrive. As per a recent survey, less than a quarter of managers thought their existing digital capabilities met client expectations. Asset managers have now found that their clients have become accustomed to digital offerings in lockdown and want to deal with digitally mature organizations. The asset management firms are alive to the challenge as nearly 80% of the top firms now consider digital a top or high priority area; however, the success will be reaped by the players with the most consumer friendly strategy and execution

Focus most on the customer experience (CX): Now a days the consumers are more mobile, read more product reviews, and buy more online than ever before. Tech-savvy firms provide seamless digital user experience and anticipate their needs to offer exactly what they want. Consumers also expect similar seamless and personalized experiences from the asset managers. In order to improve the CX, the entire customer journey needs to be revisited starting from client onboarding. The faster onboarding process can engage consumers deeply and chances of retention will also increase manifold. There is a great opportunity to use advanced digital tools to reduce the onboarding process from weeks to days. Saxo Bank’s online trading arm built a digital client onboarding tool that utilizes robotic process automation (RPA) to enable clients to fund their account within one hour of application. RPA enhances the integration of data from multiple sources to speed up the client identification process. Another big asset manager, Allianz Global Investors has eliminated the distinction between its direct sales and client service teams and formed one relationship management group. This model enables deeper relationships because it can provide the client continuity with a single point of contact from the very beginning

Direct distribution of products to strengthen branding: Currently majority of the distribution of asset management products happens through partners across banks, insurance firms, endowment funds, and pension schemes. The importance of partners will never wane, however increased focus on the direct distribution will result in better control over customer experience and cost savings too on account of curtailed commission the distribution partners. Some of the leading asset managers like Vanguard, Fidelity and Eaton Vance have a proven direct to consumer distribution model and manage trillions of dollars through direct platforms bypassing advisors. Through direct distribution, asset managers will have access to the very specific investor data that can be used for personalization at scale. Another important aspect is imminent economic influence of digitally savvy Generation Z (born between 1996–2010); it’s already the largest cohort accounting for nearly 1/3rd of the global population. This generation is digital native and might be comfortable managing the finances on their own if offered a good platform. Additionally, the ever-growing ageing of the financial adviser community will bring into the market digitally comfortable younger advisers, necessitating investments in direct to consumer proposition

Use social media optimally: As per a Deloitte survey, reputation management is one of the top challenges faced by the asset managers. Investors are constantly looking for reassurance from the asset management firms on the safety of their investments, market commentary and the information on products most suitable for their lifestyle. Social media can play a central role in meeting these important goals and in the process build reputation. BNP Paribas Asset Management also made prolific use of social media as a communication platform to support its rebranding and 2020 strategic plan. Additionally, Covid has proved a catalyst in spurring the growth of social media among the financial advisors to engage with the investors. As per a study by Putnam, a leading asset management firm, 74% of advisors using social media for business were able to initiate a relationship or onboard clients since late February 2020. The study also found that the majority of advisors who initiated a new relationship increased their use of social media for prospecting

Financial advisors are making use of all types of social media, led by LinkedIn to engage with the investors

Specialize in distilling insights at the intersection of business, digital and marketing to provide pragmatic ideas for growth of businesses.