For super funds and their advisers

Top 10 trends in global asset management due to technology

Swaran Kumar Patnaik

It is clear that COVID-19 will have a lasting impact on the way that all businesses, including funds management and wealth management, will operate beyond when, hopefully soon, the pandemic has abated. One of the impacts will be to accelerate the use of digital services. A new white paper, by digital player Infosys, has outlined the 10 top trends which have either emerged or entrenched themselves in the past six months.

These trends can be categorised under four broad assertions:

  • A COVID slowdown will not stop the shift toward passive funds and alternative investments
  • Disintermediation and democratisation of wealth management will help lower costs and fees charged
  • There will be more personalised offerings for the “new-age” client, and
  • Digitisation will support industry pain points.

Infosys, a global company with a presence in Australia and New Zealand, specialises in digital services and consulting across various industries, including financial services. It recently launched a ‘5G Living Lab’ in Melbourne and has about 1,200 employees in Australia and New Zealand.

The paper was written by: Swaran Kumar Patnaik, the Infosys head of asset and wealth management for financial services; Rajneesh Malviya, senior vice president for financial services; and, Ashok Hedge, vice president for financial services. They say that the industry’s operating model and technology infrastructure need to be reimagined to meet both economic and consumer demands.

The report says: “COVID-19 is pushing many economies into an unprecedented recession. Economic activity
has shrunk, impacting income levels and capital. The asset and wealth management industry experienced a decline in asset accumulation, assets under management (AUM), and revenue in the first quarter of 2020. Over the next few years, asset accumulation, net new AUM and revenue are expected to grow at a slower pace.

“Fee income, already under pressure due to regulations, is expected to decline. Changes in fee models will be required, focusing more on performance- based fees and developing low fee-based active investing products. The recent market volatility has made active investing prevalent in the short run. But in the long run, active investing is set to become less attractive, and more investors will move toward passive investing and alternatives due to the market slump.

“Personalised offerings and digital channels will attract millennials and the mass affluent. Application programming interfaces (APIs) will increasingly be used for better connectivity and interoperability. Increased use of blockchain and artificial intelligence to generate process efficiency will help optimise costs. Distribution models are set to be disrupted with an aim of eliminating multiple intermediaries. Digitisation and the new work- from-anywhere model will make cyber security a key concern.

“COVID will accelerate adoption of these business and technology trends over the next few quarters. Prodding further into their consequential impact, the insights derived are likely to guide technology service providers to plan and take calculated steps…”

The top 10 specific trends, according to the Infosys report, are:

  • Demand for increased transparency and lower fee-based products to disrupt fee models
  • Alternative investments to cautiously evolve
  • Digital disruption models to evolve and take products directly to the end customer
  • Open APIs to enable data sharing and interoperability in a connected ecosystem
  • ‘Hyper-personalisation’ of services to meet customer expectations
  • Inter-generational transfer of wealth driving the need for digital preparedness
  • Machine learning to help eliminate cognitive biases in investment decisions
  • Blockchain to increase process efficiency and transparency as well as reduce costs
  • Client lifestyle management to be streamlined using emerging technologies, and
  • Following digitisation and working from home, cyber security to become more critical.

– G.B.

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