Milking the Digital Cow

For consultants, meetings with a potential new client can be very similar to a job interview.

  • What do you think are the main challenges for Asian asset managers?
  • What trends are you seeing in product development?
  • Best practices in valuation of illiquid foreign assets?

These have typically been some of the questions that prospects use to evaluate us and our firm. However, questions around themes such as digital disruption and flavour-of-the-month topics such as IoT for investment decisions, blockchain and robo-advisors are increasingly becoming more common.

Extensive questions regarding Innovation Labs, Digital Risk and “Digital Roadmaps for 2020” are usually telling indicators that clients may have had a few sessions too many with Chief Digital Officers and Innovation Gurus.

Asset managers were similarly worried with the rise of the Internet in the 90s and with the emergence of smartphones in the late 2000s. Technological advances will definitely continue to play a key role in shaping the asset management industry, but before clients start burning cash to ward off potential threats, we prefer to reaffirm that the challenges are not much different from what they have always been:

  • The generation of mandate aligned risk adjusted returns
  • Cost pressures and margin compression
  • Competition from instruments with lower fees and competitive returns (passive investments)
  • Stringent regulation around capital and compliance requirements
  • Efficient client onboarding and client servicing
  • Maintaining clients’ trust and safeguarding their assets

Going forward, blockchain and robo-advisors might indeed play a role in tackling these challenges, but managers should try and filter out the noise generated by vendors and consultants, who often have vested interests, and stay true to the business at hand.

As technology evolves, so will the way asset managers do business. Disruption is expected to be around the corner but, as advisors and consultants, we should avoid drowning clients in a digital wave of fear.