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Digitalising financial services still in early stages

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When it comes to technology adoption and innovation, compared to other industries financial services is merely scratching the surface. Dipping its toe in. Engaging in proofs of concept but rarely integrating new solutions across multiple geographies. 

When it comes to technology adoption and innovation, compared to other industries financial services is merely scratching the surface. Dipping its toe in. Engaging in proofs of concept but rarely integrating new solutions across multiple geographies. 

This is not because firms have their heads buried in the sand. It is more the fact that operating budgets are constrained, ideas are not fully fleshed out or clearly communicated and, in some cases, there is a lack of urgency among senior management. 

But such is the pace of technology, driven by robotic process automation and sophisticated algorithms, that financial services firms have a duty to evolve their business models – such as the digitising the investor experience – or risk being left behind. 

In a new discussion paper entitled “Getting ahead vs. catching up: Digitize the Investor Experience”, SEI sets out what digital transformation looks like to financial firms and how investors, managers and regulators alike are acting as catalysts of change. Those managers who are particularly focused on upgrading their offering, via different technology tools and applications, are doing so because the appreciate the value of client service and because technology can give them greater business agility.

This is important in the sense that acquiring clients has become more challenging and costly as competition increases. As SEI is quick to point out, retaining an existing client is far cheaper than getting a new one. They write: “With much of the asset management ecosystem now focused on digitisation and how it can improve the client experience, we are seeing how intelligent data strategies have the potential to shorten onboarding times, increase portfolio transparency, anticipate client needs, ensure greater cybersecurity, and provide a customised experience.”

By making changes to its investor platform, SEI has fundamentally altered and deepened its relationships with managers, and by extension the end investors. SEI is fully invested in the transformative potential of technology in financial services. This is not science fiction. It is science fact. It is a trend that promises to make investors’ lives better in concrete ways. 

This is not revelatory. Every day, our personal lives are influenced by social media platforms that seem to instinctively know who we are (thanks to machine learning algorithms) and curate the way we view the world. Why should asset managers not be aspiring in the same way?

A recent report by Capgemini, “Growth In the Machine”1, delves into how financial services companies might think about moving intelligent automation from a cost play to a growth strategy. 

The report reveals that global financial services firms are using automation to transform their operating models as they target process efficiency and reduced operational costs; upwards of 10 to 25 per cent, rising to 30 to 50 per cent with cognitive automation.

More importantly, it reveals that 45 per cent of financial services firms believe that internet giants, such as Google, Facebook, or Amazon, will be their main competitors in the next five years.

Data is the primary force

As awareness of the transformative benefits of digitisation rises among asset managers, it is vital that a data management strategy is established.    
More so than many other types of businesses, asset managers are positioned in a unique position at the nexus of multiple (and massive) data sets. Client data is a key part of the equation, but it is joined by market, economic, and competitive data. The prospect of integrating these data streams in useful ways is what drives companies to transform their businesses into what Deloitte calls “information-centric, analytics-driven, and agile data consumers.”

SEI’s paper points out that effective digitisation cannot happen tactically if transformation is the objective. It’s crucial to understand the experience from an investor perspective before you can identify changes to systems and processes. Similarly, layering new technologies on top of old ones is not recommended.

Probably the biggest issue that managers face when looking to digitally transform the client experience, is legacy technology. Far from being merely a cost concern, more importantly it’s a case of managers thinking, ‘How do we change our firm at the design level at the same time as running the business?’ It’s akin to building an aircraft while flying it: no easy task! 

The mindset, the skillset, as well as the lack of investment – there’s a lot of things happening at the same time but most people would agree that digitisation is the future. Asset managers know it’s a place they want to get to, they’re just not sure how best to go about it achieving it. 

According to a recent survey conducted by the asset and wealth management consultancy firm Alpha FMC2 despite spending on average GBP15 million a year on digital technology, almost a quarter of asset managers feel their digital maturity is “fragmented” and they are beginning to lag behind other organisations. 

In addition, some 69 per cent of respondents said legacy technology remained the primary obstacle to change, while 62 per cent cited the need for a widespread change in company culture and mindset.

Those who can overcome legacy issues, however, have the potential to generate new sources of revenue from intelligent automation. According to Capgemini’s report, which surveyed 1,500 executives across 750 global organisations, 31 per cent felt it would lead to faster time to market to launch new products, while 25 per cent said it would lead to improved cross-selling efforts with clients.

The report makes reference to OCBC Bank, one of the largest banks in Southeast Asia, which launched an AI solution in 2017 to drive new revenue streams. Known as “Emma”, this chatbot service for home and renovation loans had handled 20,000 enquiries within four months, 10 per cent of which had been converted into sales. 

This is just one of myriad applications of AI/intelligent automation that could help financial institutions re-imagine how they interact with clients; especially retail-focused institutions. 

Portfolio management has so far been the primary area of application for cognitive computing in the asset management industry, but it is also being used to make operations more efficient, manage risk more effectively and improve communications with clients.

Going forward, client interactions will increasingly use new technology like voice recognition, augmented reality and personal assistant software. Investors already use Alexa to retrieve their balances and transaction histories.

Measuring evolution

What metrics might be useful in tracking the evolution of the client experience? 

SEI believes that measuring the relative concentration of various client types could be helpful. A more pointed metric would be the onboarding cost and/or time per investor. While it used to take private fund managers anywhere from 90 to 120 days to onboard new investors, for example, a new technology-driven platform created by SEI allows the same process to be accomplished in as little as a day or two with much more accuracy and repeatability. 

There are countless other measures that can help managers track the efficacy of their transformation, including changes to the satisfaction levels of their clients.

For example, Malaysia-based CIMB Bank started RPA implementation in September 2017 for automation of a host of banking operations, including financial reconciliation, audit confirmation etc. To date, it has already automated 47 processes. Moreover, it has managed to achieve a 90 per cent reduction in turnaround time for nine out of 15 banking processes that were automated using robotic process automation (RPA) in November 2017, according to CapGemini’s report.

There is no question that digital transformation is a formidable undertaking, but a very real danger exists in not doing anything. 

Most industry executives agree that not keeping pace with digitisation is potentially devastating, with SEI pointing out that almost three out of four industry executives saying that financial services firms not using today’s technologies to transform customer strategies, relationships and experiences “are at risk of disruption or obsolescence”.3

The extent to which a fund manager develops a digital client experience will, as with most things, be largely driven by the investor. Over the last decade, managers have worked hard to give investors more transparency and more access but investors are getting more sophisticated and continually demanding more.  

A lot of the technology focus has been on the back end, none of which really directly affects the consumer. Today’s hedge fund investor, benefitting from a relatively low volatile yet upward trending market, might say, ‘I’m giving you this much money instead of going somewhere else and buying an index for a couple of basis points. Why should I pay all these fees to you, and not get better analytics or real-time insights on performance?’ 

Ostensibly, those managers who successfully develop a digital investor experience will get much more granular data on their clients. This could help strip away outlier investors and create a more homogenous pool, where both the manager and the investor pool all share a tighter alignment of interests. 

Logic would suggest this would then lead to an enhanced client experience.


Read the SEI white paper Digitize the Investor Experience. Select preferred format: US/UK











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