Issues Archive » FundsTech Summer 2021

Roundtable: New age thinking

FundsTech – Asset managers are increasingly reliant on third parties, so how do you solve that disintermediation fear?

Bernstein – Ultimately, the friction in the market is the problem and that stems from fear. I operate every day knowing that I don’t need to be the third party; I could be part of a bilateral relationship. There’s this incredible fear in the market structure which creates roadblocks and leads to operational friction. When we reduce the friction, we create an open environment, like Amazon – Amazon isn’t the producer, it’s the facilitator and eliminates friction in transactions. The same thing can happen in the funds industry. I think it will reduce cost and friction and open up the market.

Lorenc – It is not a question of lacking innovation. It is about how we deliver the innovation and technology that is already here. For example, if you look at agile software development and DevOps – it is a great concept that requires full trust between parties. You need to throw away ‘waterfall’ thinking and protecting your own territory and work together and experiment to deliver a solution that works. So, it’s not the technology, it’s the methodology that requires a change of mindset.

Ruetimann – Collaboration and differentiation are intrinsically linked. No asset manager has all the required capacity and capability in-house and must thus source talent, technology, and services from external providers. Differentiation is based on investment performance, quality of client servicing, risk management and culture.

Hornett – The younger generation have different demands and want a different experience. We have got to start thinking about that because we need to encourage people to save and to start thinking about their long-term futures. I know it’s difficult to make that appealing, but I’m not so sure the products and services that we operate are going to touch that generation in the right way and I fear they will look for alternative vehicles to invest in. They have a different view of the world and they want a different experience and we need to adapt to that.

FundsTech – What impact has the pandemic had on innovation?

Aerts – It has been an accelerator for digital solutions and for cloud-based services – developments that were already underway before the pandemic. Now we see more of our clients trying to go beyond that and are looking to digitise everything so that they can ensure a seamless relationship with their employees and clients, whatever the situation. This has led to projects being initiated such as implementing new platforms or providing real-time information to clients so they can be autonomous.

Bernstein – If any of us had hired a management consultant and asked how long it would take and how much it would cost to implement remote working across the entire industry globally, they would have told us that it wasn’t possible. Yet, we did it all in four or five days. The pandemic forced us to do things we needed to do, like remote working. It also levelled the playing field. Those big companies that could send 50 people on a private plane to meet a potential customer could no longer fly. We learned that it is way less expensive to go digital rather than spending all that money on travel and marketing. In the funds industry, it has been interesting to watch this dynamic. The big players in areas like distribution have always had the upper hand. Now we are seeing niche players come to the market – fund managers with interesting products reaching end investors without having to sit on a plane or in a conference room. It is David versus Goliath at its best.

Andemeskel – The biggest transformation has happened in the culture of work. For employers, having an office was always a guarantee that people will be working. They have had to adapt to the idea that people can work from home and still be productive. The proof is there. Remote working is also here to stay. It has also made it possible to have decentralised teams from all over the world working from home.

Clarkson – The pandemic has shown how blessed we are as an industry that most of us didn’t lose our jobs and were easily able to transition to a working environment at home. But we forget that a lot of young people were suddenly jobless overnight and are still jobless 18 months later. These are the cohort ones we are trying to sell to with the digital services and innovation we as an industry have been discussing for the past few years. However, part of the innovation is not necessarily to do with technology but with social development and recognising that as an industry, we have to reach a younger audience, earlier. That might mean Instagram influencers portraying how wonderful it is to save money or even include financial services in education, as a Leaving Certificate, A-Level or Baccalaureate qualification. We’ve all fallen into this industry – there’s no degree course for custodians. How do we make people recognise that financial services are critical to their mental and physical wellbeing from now into their retirement years?

Lorenc – We’ve seen a big improvement in reducing the use of paper but there have been challenges elsewhere. Without team colocation, software companies cannot move as fast as they could. For some, the happiness that comes from working from home compensates for not working together in the same space. But for specific methodologies, like Scrum, colocation is critical because the team needs to know everything all the time, so their velocity is impacted and innovating is more difficult. And, as Richard said, the funds industry survived the pandemic and is doing very well. But if you look at the long-term economic outlook, it’s tragic. We have lost many, many potential investors for the foreseeable future.

Hornett – The pandemic has changed everything. Our traditional ways of working are now different and the way that we think about things is different. For an organisation like Citi, having up to 200,000 people working remotely at one time proves that cloud infrastructure and everything can work and can be very effective. Initially it was all focused on maintaining service and standards, but the home working environment gives you the space to do some lateral thinking that you may not always get in the office. The flipside to that is working with people drives ideas. You need that interaction and it is not always possible on a video conference.  You need to have that balance where working from home is combined with time in the office, which is also important for mental health. We will have a new way of working, but we’ve got to recognise that the people piece is still vital in our industry.

Glyn – As a digital business, the pandemic has shown us that you can go from a physical to a virtual environment. But we have also seen so many asset managers now who are looking to change their TA [transfer agent] or their custodian because of the poor service, particularly around reporting. The number of RFPs [requests for proposals] I have seen has been shocking. Back in 2008, PwC looked at people who changed their providers during the financial crisis and it was because of poor service, not poor performance. During the pandemic, there has been such disparity between securities services providers – the good ones and the ones who failed because they didn’t have automation and couldn’t provide real-time reporting to their clients. That’s been a real game-changer.

Ruetimann – We observed two somewhat opposing trends. Some fund managers are now accelerating their digital transformation programmes with focus on the digital client experience and use of cognitive technologies for portfolio research and construction. Others seem to play it safe, waiting to benefit from the innovation pursued by their external services providers. One could interpret this as being about the risk and reward ratio, job security as well as shrinking project budgets