Our panel of experts discusses the state of innovation in the industry and whether technology and the pandemic have created a once-in-a-generation opportunity to change. Chaired by Nicholas Pratt.
Edward Glyn (Head of global markets, Calastone)
Janusz Lorenc (CEO, Metrosoft)
Richard Clarkson (Global head of solutions, Oracle)
Markus Ruetimann (Chair and co-founder, Aprexo)
Daniel Andemeskel (Director, head of innovation management, Universal Investments and managing director, UI Enlyte)
Maxime Aerts (Managing director & COO, Fundsquare)
Niall Hornett (Managing director and head of UK funds product management, Securities Services, Citi)
Eric Bernstein (President, asset management solutions, Broadridge)
FundsTech – Where has innovation been most evident in the industry?
Richard Clarkson, Oracle – The events of the last 18 months have driven a lot of innovation. There has been a pivot to the cloud and a search for new ways of doing traditional, mundane ‘old’ jobs. As an industry, we have begun the move into digital services, for both the service offering to the investor and the service provided within the organisations. We have also seen the globalisation of asset management. The larger players want a single source of truth rather than multiple systems from multiple providers.
Janusz Lorenc, Metrosoft – We have seen a significant move to digitisation here and I support the idea that large players want to consolidate platforms and vendors and have a single source of truth. The problem I see is that very large players can afford this, but the middle-size players cannot, unless a comprehensive solution is offered on a Software-as-a-Service basis.
Maxime Aerts, Fundsquare – Cloud computing, APIs, blockchain, artificial intelligence and machine learning are all becoming reality in our world. They used to exist as standalone technologies but we now see real-use cases. We’ve also seen an evolution of the service model where the aim is to put the client at the centre and to adjust the product based on client behaviour. Finally, we’ve seen a business evolution via tokenisation of assets and registers providing increased access to inaccessible products and bringing more liquidity to illiquid products.
Markus Ruetimann, Aprexo – Our changing operating environment is influencing innovation. We continue to experience the prevalence of passive asset management. Currently a fifth of assets under management (AuM) are reportedly managed passively and the industry expects that to go up to a third by the end of 2025. At the same time, the mega asset managers control 53% of all AuM and that is likely to go up to 68% – according to PwC. Customers are getting younger, expecting a more exciting digital experience and we’ve seen the democratisation of investment knowledge. All of these trends will have an impact on innovation and how asset managers compete in future.
Innovation has been most evident with respect to cloud adoption, data science and the emergence of AI and ML technologies which are still on the frontier and not yet core. You also have the fintechs developing data management products to address the absence of data lineage, provenance and traceability. The pandemic has accelerated the need for targeted innovation.
Daniel Andemeskel, Universal Investments – I separate innovation within the traditional business set-up and new products and business models. Innovation in the traditional business has been focused on distribution, products and operational efficiency, e.g. we are using news-based real-time ESG analysis to cater for new clients’ demands. The traditional business model can be exemplified by a diesel car, because we are a huge manufacturer of funds and investment products, and the new product or business model (UI Enlyte) is like an electric car, a whole new platform for digital assets using the blockchain/distributed ledger technology (DLT). That separation is very important when it comes to reaping the benefits from these environments.
It has been a great year for innovation. The pandemic accelerated a lot of things and it meant that firms could no longer avoid developments like remote working. It was also interesting how much push there was from regulators for new working environments. They are putting a lot of new laws in place around tokenisation and digital assets and really spearheading a lot of innovation.
Edward Glyn, Calastone – The industry has come a very long way in terms of removing friction from the supply chain of asset management. We’ve got a long way to go, but we have removed a lot of the friction that was traditionally there. We are in an industry that has typically moved data back and forward from point to point and when I look at the work that we have done with clients over the past couple of years using DLT, you’re now sharing data, as opposed to moving data, which has given rise to massive potential.
In terms of Daniel’s point about current and new operating models, we still have a lot of assets to sweat in terms of improving current processes, whether that’s around data or manual transfers. But there is also this promised land that we can get to and we should focus on both.
Eric Bernstein, Broadridge – Our own research shows that in the last 18 months, digital has outperformed its peers across multiple areas, from onboarding to clearing and settlement, with a big emphasis on the user experience. In the pandemic, we thought it would be difficult to implement new technologies and initiatives while physically distant from the client. However, we’ve learned that it’s much easier to guide a customer to onboard electronic tools from the web in five minutes. These tools are incredibly intuitive, and you are using a data source that doesn’t require an army of people to ensure it is correct and reconciled. I think that trend is going to accelerate even further with the new technologies that are out there, like Snowflake.
Edward’s point about the use of the blockchain to consolidate data and create a single source of truth has never been more important. The industry is moving from closed architectures to a completely open, API-enabled world where everyone is accessing the same data set in real-time. If you combine that with the new digital experience, where you have a new user interface on top of something like blockchain, that is where the future lies.
Niall Hornett, Citi – The world has changed since March 2020. Socially responsible investing is everywhere and will continue to grow. The younger generation of people are more attuned to what they’re buying and where they are buying it from, whether it is divesting from petrochemical firms or active investors putting pressure on supermarkets to declare the fat levels in their fizzy drinks. People are clearly going to start investing with a social conscience, whether that’s a retail investor putting money into an ISA or an institutional investor. The industry has to recognise that and be able to use data and analytics to demonstrate they are living up to their ESG claims. Our clients are very interested in how we help them in that space, for example, working with fintechs on ESG ratings. But there is still a long way to go in terms of developing a standard market taxonomy and continuing to drive innovation.