The COVID-19 pandemic has highlighted the potential for technology to reshape the finance and investment industry. Data harnessing, insights from analytics, automation, and personalized customer experiences are some of the initiatives that asset management firms have adopted to remain relevant in an increasingly digital world. Firms that cannot keep pace are at risk of becoming obsolete.
Today, investment and portfolio managers are engaging with clients in innovative ways not possible before. They utilize technology for client interaction through digital channels, organizing virtual meetings, handling queries through chatbots, building remote relationships, and providing customized reporting. Asset management firms that use technology to better client engagement are likely to grow faster and be more successful in the future.
Although automated gated processes remain pivotal for success, asset management companies are now looking for something more than speed. Companies need to manage their new and growing product portfolios for a more dynamic environment. The financial and money markets are no longer as stable as they were previously. The dynamics are shifting constantly.
COVID-19 has taught the world that change can happen extremely fast. In response, asset management companies must actively manage their product portfolios to be ready to change strategic direction when the circumstances demand it. The bottom line is to remain vigilant and move quickly when necessary.
The most relevant single metric in portfolio management has traditionally been return on investment. Recently, however, there has been a gradual shift from investment projects to product portfolios and from products to services. With asset management firms rethinking how to add and deliver the most value to their clients, they must also consider objectively measuring that value. The challenge facing many firms is how to shift toward a progressive model of adaptive portfolio management focused on value delivery while taking advantage of the traditional and agile approaches.
As digital assets increasingly become mainstream, asset managers are getting more inquiries from their clients about including these emerging assets in their investment mix. The bitcoin wave has altered how investors look at cryptocurrencies, marking a striking change from just several years ago, when digital assets were looked at with suspicion. But individuals seek to capitalize on the new frontiers, and portfolio managers will have to find ways to incorporate them.
As with any industry today, asset and portfolio managers must grapple with cybersecurity and risk management issues related to the security of customer information and their business. A breach or the actual loss of sensitive client and employee data can be disastrous to the reputation of an asset manager’s brand, not to mention a severe blow to clients’ trust. If investors are to continue working with an asset manager, the latest technology must be employed to protect sensitive data, including encryption and other security measures.
In the future, it will be critical to control asset management costs if profitability is to be maintained. That means adopting new technologies, particularly those that can help automate specific tasks that people previously managed. Also essential is acknowledging what an asset manager can do well and efficiently. The rest can be outsourced to those better equipped to handle it.
Managers should explore using robo-advisors and billing by the hour rather than charging clients monthly or annual retention fees. That will lead to a business model that allows the asset manager to control costs while passing the savings to clients in an increasingly competitive environment.
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