Evolution across the Asset Industry

Times are changing for the asset management and asset servicing businesses. Sweeping changes are occurring across the industry transforming tightly managed markets and counterparty based relationships from a business that has been:

  • Labour intensive
  • Reliant on many manual processes
  • High cost
  • Based on older systems and processes
  • Often ‘off market’ or OTC 

Catalysts

Regulation – there has been no let-up e.g. UCITS, EMIR, MIFID and the Basel accords. The result is that transparency has come to the fore. The intensive effect of regulation is providing greater visibility and taking it ‘out of the shadows’ in some cases. I consider this to be very positive.

Convergence – there are more new lower cost fund types e.g. passive ETFs for example.  Consolidation is creating new super-sized entities; see Standard Life’s merger/ acquisition of Aberdeen in the UK.

Technology – leading to further automation and client experience. Creative technologies are opening new marketplaces, for example the Fintech marketplace.  Customers will benefit through enhanced and superior service and a greater insight and understanding of their own needs (thanks to data interrogation and behaviour analytics). Four tech areas in particular that will reshape the asset business:

  • Open Distributed Ledger/ Blockchain
  • Transfer Agency (Share register)
  • Custody & Corporate/ Income Events (Record keeping)
  • Settlement & Clearing (Secure centralised system) using cryptography and smart contracts
  • Repo and Stock Loan (Time stamped ‘on market’ trades)
  • Artificial Intelligence (AI) (Stock picking, investment decisions and portfolio choice)
  • Robotics (Operational process benefits, investigations and customer service)
  • Data (Personal finance (PFM), credit scoring and behaviour analytics)

What Happens Next

We know the large global institutions are on board with partnering and collaborative arrangements. They are adopting these market forces, learning from what the Fintech’s bring. How the smaller players, the brokers, advisors and intermediaries servicing the SME and retail space will be interesting to see.

References:

  • Deloitte Consulting
  • Fintech News
  • MIT

Stephen Sheehan is a graduate of MIT Future Commerce and Fintech and is an international banking specialist assisting Fintech focused companies through his company www.digitalstate.ie

 

 

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