Where are Asset Managers on their Digital Transformation Journey?

Asset management (AM) companies work hard to provide good oversight, governance, transparency, and regulatory compliance to attract and maintain investors. The work is complex and process heavy. Even before the COVID-19 pandemic, the financial services sector was under significant pressure to enhance the efficiency and agility of all these operational processes. However, despite the fact that digital transformation is widely supported across the sector, nearly two-thirds of asset management firms (63%) have not yet completed their digital transformation programs.

In light of social distancing safety measures, lockdowns and other considerations around the pandemic, the failure to transform to digital has created several challenges for the large number of AM firms that are not yet fully digitalized.

A global snapshot of Asset Management today

Our recent industry study gave us an interesting global snapshot of the digital transformation status of asset management companies in 2020. In terms of digital transformation completion, Asia-Pacific (APAC) is already way ahead (62% completion) in comparison to Europe, Middle East and Africa (EMEA 37% completion) and North America (13% completion).

These numbers highlight a big opportunity for AM firms, because with so many competitors lagging behind on digital transformation, there is a real opportunity to gain a competitive edge. The companies that are prepared to accelerate towards completion will be the first to reap the benefits.

Building the business case: What are the key drivers to digital transformation?

While this opportunity to gain a competitive edge is still on the table, getting decision-makers and leaders onboard is key. Let’s look at some of the main drivers of digital transformation and the argument for accelerated completion. There are three core themes:

Challenger Banks

Across the wider industry, we can see how challenger banks have thrived through their ability to facilitate frictionless digital onboarding, compliance and management. Our latest study shows that nearly two-thirds (63%) of AM firms state that the success of new digital-first challengers is a key driver of their own digital transformation activities.

Interestingly, the study also demonstrates that in the 12 months prior to the survey, 84% of asset management companies said that they lost investors to digital-first competitors. It’s clear that many AM firms are already aware that digital-first companies have a competitive edge. Across the sector, there is a greater sense of urgency in the drive towards digital transformation and a race to accelerate towards completion.

Improved Efficiency

We know from our in-depth research that more than a quarter (26%) of new investor applications are abandoned due to inefficient onboarding. The challenge – especially in North America – is a reliance on fully manual processes for data collection. Looking at how these manual processes can be digitized and streamlined is key, because today’s clients expect everything to happen quickly. In their eyes, financial institutions are measured against lightning-fast companies such as Amazon, Netflix, digital-first banks and open-banking apps. Without a doubt, speed is the new language of consumers and businesses today, and for asset management companies the only way to become fluent is full digital transformation.

COVID-19

Since the onset of the COVID-19 pandemic, we have seen even more evidence in the industry of the negative impact on user experience. With social distancing and lockdowns making face-to-face meetings difficult or impossible, companies that have not been able to offer digital onboarding – such as investor portals or integration with customer relations management (CRM) solutions – are essentially shouldered out the way by competitors that can offer clients the digital services they need.   

Nearly half (44%) of asset managers plan to implement artificial intelligence (AI) into their customer experience over the next three years, and six in ten (61%) are already implementing natural language processing (NLP) to speed up data entry. It would be fair to say that COVID-19 has probably sped up the move to automation.

Change is cultural and leadership from the top is key

In terms of market share, the companies that are moving towards the completion of their digital transformation projects will reap the benefits first. And while this first-mover advantage is still on the table, leaders are taking note. Almost a quarter (23%) of asset management firms say that a change in leadership is the main driver for digital transformation.

The good news is that your digital transformation can be simplified. We already have the technology required to enable companies to accelerate their digital transformation efforts and automate manual processes. Fenergo’s Client Lifecycle Management gives financial institutions the ability to deliver a fully digital, best-in-class customer experience.