The digitalization of asset management

Digitalization has been a buzzword in asset management circles for some time, but Covid-19 highlighted an industry that was still too reliant on outdated manual processes. Cracks were revealed even in the middle and back offices, which had been seen as more digitally advanced than their front office counterparts.

The good news was that most firms adapted quickly to remote working, debunking the ‘proximity myth’ that teams needed physical colocation to perform effectively. However, as life resumes its normal pace, asset managers have no choice but to improve digital agility and accelerate the transformation journey. The pandemic has fundamentally changed the way that customers interact with businesses – and the way that firms organize their operating environments, teams, and workspaces. It has also changed long-held beliefs about the nature of work. As a manager, your focus should extend beyond reducing costs and extracting greater efficiencies in the short term to include leveraging growth opportunities, improving risk monitoring coverage, improving operational resilience, and enhancing the customer and employee experience over the long term.

A recent report by Alpha FMC, an asset and wealth management consultancy, confirms that Covid-19 effectively stress-tested the digital estate of many firms, highlighting that some might not be as far along in their transformation journey as they previously believed. It noted that the shift in modus operandi from physical to remote locations, combined with lockdowns and social distancing, exposed the negative impact of manual processes and outdated systems within organizations.

It is perhaps surprising that asset managers have been slow to embrace digitalization. Over the past few years, even the behemoths have been under pressure from dwindling margins, greater regulation, changing investor preferences, and increased competition from both traditional cohorts as well as digital challengers. The Alpha FMC report cited the main obstacles to adoption were a lack of investment, organizational set-ups that are digitally incompatible, and the need for cultural change across businesses.

The last point should not be underestimated. One of the reasons why market upstarts have been better able to capture business is because they have been more creative, nimble, and faster to market with customer-first, digitally-driven solutions. They also had a better grasp on evolving customer requirements, where clients expect the same user experience provided by mobile banking and other smartphone apps. In other words, speed, value, flexibility – not to mention innovation in both delivery and pricing models – are key competitive advantages.

Accelerating the pace of change

Covid-19 has accelerated the pace of digital transformation, according to the large majority of directors polled by Gartner. This helps explain why around 80% of the 40 largest global asset managers polled in the Alpha FMC study now consider digital a top or high priority area, compared with 64% in last year’s survey. A close second is the need to improve the customer experience in order to attract new customers as well as increase retention.

While each section of the organization will have its own pain points to address, there is a common toolkit being deployed which includes robotic process automation (RPA), artificial intelligence (AI), machine learning (ML), natural language processing (NLP), data management and hyper-automation.

For example, in the front office, there is an increasing need to utilize AI and ML to optimize decision-making. This means extracting the structured data of financial statements, conference call transcripts, press releases, industry databases as well as unstructured information found in emails, blogs, and social media. Together, they can create meaningful insights to be used across a range of functions such as investment research, financial models, forecasts, and risk assessments.

AI/ML can also be used to effectively combat cyberattacks, which have surged during the pandemic and the subsequent move to remote working. Real-time threat intelligence can bolster firms’ defenses and mitigate the risks by identifying the attackers, their motivations, and capabilities before they can do untold damage.

Meanwhile, middle and back offices should undergo an automated makeover. Too many processes remain manual and cumbersome. Take expense management. Many firms still rely on human input into spreadsheets which can lead to costly mistakes. Regulators, in particular the Securities and Exchange Commission (SEC), are shining a much brighter light into the books of asset managers, and particularly alternative funds. Firms must demonstrate that they are following the stated agreements of the Offering Documents and Investor Agreements or face disciplinary measures including large fines. Holistic plug-and-play expense management solutions can help firms streamline inefficient expense processes and assure regulatory compliance. 

As the pandemic has clearly shown, asset managers need to be armed with the latest digital tools to sharpen their competitiveness and optimize the value for their customers. Those who are not agile, innovative, and efficient will be left behind.

About the author, Anup Kumar

Anup Kumar is a seasoned leader with 30 years of industry experience in Investments and Insurance. He is currently EVP & Global Head of Services at Linedata and leads all aspects (Operations and Technology) of Linedata’s Global Services business. Linedata’s full Services portfolio for buy-side firms includes Front Office, Middle and Back Office, Advisory, Cybersecurity, and Managed Services Provider (MSP). Anup’s career experience spans the Asset Management, Healthcare, Insurance, and Retirements industries, where he has held executive roles including President and CEO, Board Member, JV Head, and Business Head. He has led businesses of up to $350M in annual revenue at leading outsourcing services firms, including Capgemini, Hewitt, EXL, Patni and Tech Mahindra. Before joining Linedata, Anup was doing CXO Advisory for Institutional buy-side clients and mid-market private equity firms.

Digitally driven services

Linedata Global Services are helping firms digitally transform their operations, with three new managed services and co-sourcing solutions:

Cognitive Investment Data Management uses AI/ML technology to expand market coverage without adding headcount and associated costs. It provides data, analysis and intelligent insights so front-office teams can make smarter decisions and scale to grasp new investment opportunities without adding applications or overhead.

Our Expense Management Solution transforms back-office operations with a service built on best practices and a best-in-breed digital platform. We transform your manual vendor management and expense allocation processes into digital workflows that mitigate risk and free up internal resources for higher value-add activities.

Linedata Protect, and Linedata Protect Premium, our Endpoint Detection and Response (EDR) and Managed Detection, Response and Remediation (MDRR) offerings bolster your cybersecurity protection with an all-inclusive offering based world-class technology from leading providers and over 1 million endpoints already being protected.