Fund distribution is going to be driven by technological innovations going forward. This is a given. But this means that many organisations will need to go back to the drawing board and adapt their marketing strategies to these changes.
What the industry is saying
An industry conference like Fund Forum International in Berlin would not be complete without reference to disruptive technology, be it Blockchain, robo-advice, artificial intelligence or big/intelligent data. Robo-advice is expanding in the asset management industry as end clients increasingly demand streamlined, simplistic advice online. This is particularly pertinent given the dearth of investment advice following the introduction of the Retail Distribution Review (RDR) in the UK and the imminent adoption of the Markets in Financial Instruments Directive II (MiFID II) across the EU in January 2018.
Millenials and robo-advice
It also correlates with changing demographics. Younger people or millennials are looking to save, and traditional distribution models are unlikely to appeal to them. As such, fund managers need to reposition their businesses, and robo-advice could play a useful role in doing this. The proportion of young people who use mobile technology or apps as part of their everyday lives is something fund managers need to be alert to. Engaging with millennials through conventional sales processes is unlikely to yield past glories of capital raising success.
Look at China, for example, where fund sales are being increasingly made through online platforms, according to panellists speaking on an Asia fund distribution panel at Fund Forum International. One of the biggest domestic fund managers in China is a subsidiary of Alibaba, the technology giant. If managers want to win business in Asia-Pacific (APAC) in particular, an adoption of alternative and tech-savvy distribution models is required.
Data connects it all
Robo-advice and data are interlinked. It is important that fund managers ensure their data is consistent across multiple platforms and attain the highest quality in data analytics. The route to consumers is changing, and robo-advisers are going to attract a lot of business. Having quality data will help managers’ prospects at getting noticed on robo-advisory platforms. This could help with capital raising.
Equally, intelligent data can be deployed to improve business strategies and help managers make informed decisions. This can obviously result in cost-savings and selling opportunities. Having excellent data management systems or using a provider which has the capabilities to consolidate and aggregate data from multiple sources, then transform it to meet the requirements of all the disparate sites, regulatory entities, platforms, and outputs that will use it is essential.
EU: one regulation = many implementations
Given the divergence across EU member states in terms of implementing regulations, having systems that are flexible to tailor for the bespoke data and regulatory reporting requirements in individual countries is key.
Take Annex IV. Firms marketing through national private placement regimes (NPPR) under the Alternative Investment Fund Managers Directive (AIFMD) must supply Annex IVs in the countries where they are soliciting business as opposed to their member state of reference. Annex IV implementation is slightly different in some countries than it is others. Having systems that can adapt to these differences can help streamline managers’ regulatory reporting efforts.
Get your data ducks in a row
Adoption of new technologies to facilitate automation and efficient data collection is essential not just from a regulatory perspective, but a distribution one. Failing to adapt to technological change will put managers at a competitive disadvantage going forward.
The bottom line is that in all of the above changes, robust data governance is essential. This is not only relevant in context of the potential future market and operational models driven by the emerging technologies, but it is already a reality, as the impact of low quality data governance results in high operational costs and missing out on business opportunities.
The smartest immediate action firms can take while more practical use cases for the emerging technology are maturing is to get all their data governance ducks in a row. This way you strengthen your current business and operations at the same time you establish a solid data platform that will enable you to succeed no matter what the technology landscape will look like when the dust settles.
By Lee Godfrey