Asset Managers, are you ready for the digital tsunami?

OPINION / 30th August 2016

As the riptides of digital disruption are spreading across all industries, reshaping user behaviour, introducing new business models and disrupting respected industry leaders, today is possibly the best time to assess the situation of your business.

In August 2011, Marc Andreessen wrote in The Wall Street Journal “Software is eating the world”. A message announcing the spread of a digital wave across all industries. Since then, media companies are suffering from the democratisation of online publishing. Social media reshaped the ways we are building personal and professional relationships. Even Google entered in the automotive industry with its self-driving car! No industry is safe from this digital disruption tsunami.

For years, many experts have been saying that the B2B financial sector was out of reach of these changes due to its complexity, high entry barriers and the one-to-one human interactions that make this industry so hard to “digitise”.

The past few years have proven that the financial sector is not safe from disruption

Supported by government policies aimed at reducing these entry barriers and motivating innovation, start-ups and digital-first companies are now challenging financial and professional services. By targeting specific products where the service quality and user experience have been neglected for years, companies like Square (in-store card payment), Revolut (international debit card), Robinhood (commission less stock-trading) and TransferWise (international money transfer) are getting a slice of the B2C banking industry pie, and it’s getting bigger and bigger every year.

So what does this mean? Are asset management services next on the disruption list? Is your business ready to transform? 

Disruption has already started

In March 2015, the Financial Times stated that it is unlikely that robo-advisers mark the beginning of the end for financial advisers. A year later, the newspaper seemed to have reshaped its opinion stating “Robots are better investors than people”.

The idea of robo-advisers may seem far-fetched, and of course human interactions will likely always remain a proof of quality in the future. However, as many of the current market leaders have neglected or barely used digital channels as part of their core business, new companies like Nutmeg and eToro are starting to reshape industry standards by putting digital at the core of their business model. This new breed of wealth management brands benefit from a new kind of self-service platform combining user-centric experience, better user accessibility and reduced need of human maintenance.

These new kinds of businesses are mainly targeting private investors, differentiating from high-end asset management groups who generate most of their revenue from Institutions, IFAs and Wealth Managers. However, these new players cannot be neglected. In time there is a strong likelihood that they will use their legitimacy and cutting-edge product to develop their market share to new types of customers, so organisations must react now.

In the times of disruption, we need a revolution

Twitter CEO, Jack Dorsey, often publicly shares his despise for disruption and preference for a more positive transformative force: Revolution. Revolutions are supposed to bring value and purpose, set a direction and have leaders. This optimistic message implies that companies can actually generate a positive outcome off the back of disruptive forces by empowering them to deliver great values for their customers and ultimately their business.

The movie-renting industry has seen two of its leading companies act differently in the face of disruption: Netflix and Blockbuster. Netflix quickly saw digital as an opportunity to rebuild its business proposition and developed a digital offering over multi-devices while Blockbuster remained with DVD available in stores and decided not to change its model in order to maintain its profitability. In 2010, three years after Netflix introduced its online video-on-demand service, Blockbuster went bankrupt. Netflix is now a $28 billion dollar company, roughly ten times more than what Blockbuster was worth.

Combine your expertise with the power of digital to lead the revolution

Like Netflix, the best business transformation examples, are usually made from companies that build on their strengths whilst reshaping their business processes to focus on improving customer experience. This allows them to limit their weaknesses and differentiate themselves strongly enough to develop new industry-leading standards.

Looked at in this light, established asset managers have strong advantages: in demand product, high quality 1-2-1 relationships and extensive insight expertise. It is the rest of the customer experience and business processes that need improvement to deliver transformation.

So where should you start?

To empower your asset management expertise with digital, we think there are a few areas that you should look at:

  • New platforms that improve your core business processes

  • Relationship management tools, powered by analytics, to predict user preferences and refine customer profiles

  • Self-service platforms to deliver a personalised experience, such as a best in class fund centre, an intuitive preference centre and a tailored insight explorer

Whilst there is not a single recipe to success, at ORM, we believe that the development of a successful transformation derives from 3 core-factors: 

  • A good understanding of your different audiences’ needs

  • A great forecast of the technical and competitor landscape

  • The identification of your differentiating business strengths and weaknesses

Once these pieces are in place, your business is on the right track to start its transformation. Building a digital proposition that defines new experience standards for your users, outperforms current and new challenger competition, and puts efficiency and flexibility at its core will enable progress to be made.

 

Pierre Bizeul Pierre Bizeul Senior Strategist Pierre Bizeul