In the last fifteen years, we have seen a sea change in distribution models for consumer banking with a heavy reliance on IT and technology, e.g. the advent of mobile banking. Changes in distribution models are now poised to change the shape of the investment management industry. But that’s just the tip of the iceberg with regards to changes predicted for the industry.
According to research from PwC, “… the industry stands on the precipice of a number of fundamental shifts that will shape the future of the asset management industry.”*
One billion more middle-class.
To put some scale on these shifts, it is predicted that between 2010 and 2020, “… more than one billion more middle-class consumers will emerge globally, representing the largest single decade increase in customers in history.”*
While those consumers, individually, will not represent significant wealth, together they will. How the industry best serves those customers while keeping costs low and margins tight is likely a question that will be answered by technology, in the same way as they were in the consumer banking sector.
Assets under Management growing fast.
Types of funds are growing and diversifying. For example, many more countries have set up Sovereign Wealth Funds (SWFs) so they can cushion the public budget from swings in commodity prices, save for future generations and invest in socio-economic projects. Defined Contribution (DC) schemes are increasing as governments shift the responsibility for saving for retirement to the individual instead of the state. While in 2013 Assets under Management (AuM) stood at $63.9 trillion, it is predicted that the industry will manage $100 trillion by 2020*.
The changing shape of the industry.
Yet it is not just the size of the industry that is rapidly changing. Since the Global Financial Crisis 2008, a vast wave of regulatory change has driven the transformation of the banking and investment industry. These regulations are aimed at increasing transparency by making firms outline the fees that an adviser is charging a customer. The challenge for the industry will be how to manage margins and grow profits, while managing increasing demands on reporting, all of which take time. Again, this is where technology can help. For example, with AlphaCert an automated compliance module can be added onto the base technology, enabling rapid calculations and reporting on compliance issues.
Technology and its competitive advantage.
Post GFC 2008, the pressure around management of risk and operational transparency is relentless and again technology has the power to help manage and speed up the processes around both of these issues. Yet, to date, some new technology systems such as cloud computing have not been rapidly adopted by the funds management industry, owing to concerns around cyber risk and data sovereignty in a traditionally conservative industry. The industry is changing though and beginning to embrace new technology. According to PwC, those funds that delay addressing how technology advances can best serve their needs, may find themselves eclipsed by their competitors.
Business benefits of AlphaCert.
AlphaCert was developed in direct response to many of the challenges and trends outlined above. With AlphaCert, the business benefits are clear:
- Save valuable time for highly paid operations and investment managers.
- Maintain the focus on delivering returns on customers’ investments instead of time-wasting administration.
- Reduce business risk by addressing issues of data quality.
- Spend more time on core business with swift, timely and accurate reporting on mandatory regulation and compliance requirements.
In the next few weeks, I’m going to delve into some examples of how AlphaCert could help you get the edge in the investment management sector. Get in touch if you want to find out more about our game-changing software.
* PwC. Asset Management 2020: A Brave New World.