Asset managers will survive digitalisation

Asset managers will survive digitalisation

The emerging trend of technology and internet firms moving into financial services is a challenge for the financial industry but asset managers will still have a foothold in the investment industry, according to a panel at the Association of the Luxembourg Fund Industry’s (Alfi) annual London conference.

When asked if Amazon would “eat up” his business, Sanjiv Sawhney, head of global custody and alternative investor services, Citibank International, said: “I’m not sure will eat my business but let’s take a step back. If you’re asking me whether companies like Amazon are going to become players in the financial sector 2020, absolutely.  Will they have been successful? Yes they will.”

Such firms have already started to compete with the banks in payment services. Google has reiterated commitment to its struggling mobile payments services business, Apply is expected to expand its system and reports suggest that Facebook will start providing such services later this year following approval in Ireland.

Asset managers and the wider financial industry are now becoming increasingly concerned about the potential for big internet companies to penetrate their business fields.

Sawhney said that the success of any asset management firm in the future will be driven by its ability to have information data and access to a number of investors.

Technology firms don’t have all the accuracy of data but “they have the building blocks to potentially mine information”, he added.
However, panel moderator Noel Fessey managing director, Schroder Investment Management, said in response: “I think they do , but they don’t have the kind of building blocks and expertise that you do when you relate to your customers.”

One area where technology companies could compete with financial services firms is distribution. A number of technology companies have become big distribution agents in China. eCommerce giant Alibaba has successfully branched into asset management, raising several tens of billions of dollars in a very short space of time following the launch of its financial product Yuebao in June 2013.

“These internet firms certainly excel in distribution and have been destructive in industries such as the book industry for example, and even the information industry,” said Fessey.

Manufacturing is another field where such firms could try to compete, but Shoqat Bunglawala, MD and head of international product strategy and development at Goldman Sachs Asset Management International, said that “on the manufacturing side there is still a long way to bear”.

Gad Amar, MD at BlackRock, said: “Digitalisation is a tremendous challenge for all of our industry” but that it can be a “fantastic opportunity if we find the right way to bring advice to the end clients.”

Fessey was optimistic that asset managers would survive digitalisation. “Asset managers are bright enough”, he said, pointing out that the industry has adopted technology over the past 40-50 years and “will continue to do so.”

However, PwC said in a recent report that the inability of fund managers to keep pace with technological change would open opportunities for technology firms.