DIGITALIZATION WILL CHANGE THE ASSET MANAGEMENT INDUSTRY

(Reuters)

Listening to the presentation and speeches during the International Transfer Agency Summit (ITAS), Ireland 2015 last week in Dublin, it was clear to me that digitalization is one of the main drivers of change in the asset management industry. To see this topic high on the agenda was a bit surprising, since one would expect the asset management industry already to be at the forefront in this area. Automation by digitalization helps the industry be more efficient and increase operating margins by lowering costs. But the industry may have missed a number of other opportunities, ranging from client communication to the settlement of transactions. In this regard, Dominic Hobson—founder of COO Connect—said during his presentation that the fund industry seems to have a death wish: the infrastructure used is not state of the art and the industry is coping with these circumstances like a frog sitting on a hot skillet. He said the asset management industry needs to change its attitude to infrastructure, since it is seen as a tool that helps to fulfill requirements rather than as a tool that opens opportunities. In the sense of John F. Kennedy, Dominic said: “Ask not what an infrastructure can do for you, ask what it can make possible for you to do.”

Anand Ramachandran—Senior Director, Global Banking Solutions Practice, Oracle—pointed out during his presentation that digitalization can lift the efficiency of client/prospect communication one hundred times; companies can bring their message to an audience that is ten times larger than its usual audience for a tenth of the cost of traditional communication.

With regard to the current state of the art of digitalization in the asset management industry and all the possible enhancements to automation and efficiency, it was fascinating to listen to Jamie Woodruff—Chief Technology Officer at Patchpenguin—who acts as an ethical hacker finding leaks in the online security systems of corporations. Jamie scared the audience by showing how easy it is to take over someone’s mobile phone.

He also pointed out that even though it is important for companies to interact/communicate with their clients via their website by using blogs or other text-related communication, corporations need to be very careful about the tools they use to manage content. Even the most commonly used systems don’t provide the level of cyber security one would expect. Jamie said this becomes even worse if a company uses plug-ins, since these tools are often not up to date in terms of cyber security; they are not part of the main software and aren’t updated by the developers of the main tool.

From my point of view this is a point that may hit very hard further development of the asset management industry, since industry participants have just begun to communicate with their clients and prospects via digital platforms. Now they learn this way of communicating makes them especially vulnerable for hacker attacks. Therefore, it is not surprising that regulators such as the Central Bank of Ireland are hiring cyber-security specialists to assess the strength and resilience of IT systems and controls in regulated firms, as reported by Ignites Europe.

Another topic widely discussed during the conference was the impact of new regulations on the business. Although all industry participants complain about the increasing demands from regulators, Jon Willis—Chief Commercial Officer at Calastone—saw something good in the upcoming regulations: they will heighten barriers of entry for new funds and/or service providers. He suggested that Google would rather focus further on drones than on asset management, because it is easier to guide drones from Point A to Point B than to try to handle the regulations to which the asset management industry is subject.