Digitalisation – added value for asset managers and their clients

Regulations redefine the legal landscape year after year and thus also wealth management. Legal provisions build trust and oblige financial institutions to take a long-term approach but they also require considerable commitment on the part of custodian banks and external asset managers to absorb the resulting workload.

This will also be the case for the new laws and ordinances on financial services (FinSA / FinSO) and financial institutions (FinIA / FinIO), which enter into force on 1 January 2020. A recent Boston Consulting Group study on external asset managers highlighted the consequences of these new regulations, confirming the concerns of external asset managers: nearly 42% of financial intermediaries surveyed anticipate a significant increase in manual work, 30% see a need to change their business model and 18% a need for technological adjustments.

The scissors effect – a major challenge

External asset managers (EAMs) need to adjust their business models rapidly and in some cases dramatically to cope with the diverging trends in revenues and costs, which the new regulations will only intensify. They are all striving to reduce the costs of their structure by increasing operational efficiency. They can make gains by adjusting technological infrastructures, but also by investing in increasingly integrated tools.

There are innovative solutions available geared to the specific nature of each wealth and asset management company in this period of industry-wide restructuring. It is up to the external asset managers to select their preferred solution based on their business model, the size of their company, its level of sophistication and its human and financial resources. Support for custodian banks during this process remains essential so that they obtain high-performance tools.  

Tailor-made digital solutions, adapted to your needs

Portfolio management systems (PMS) provided by custodian banks already make it possible for EAMs to visualise all the data that is entered for their clients at the bank in question in a single tool. The most efficient systems include a multi-jurisdiction dimension. In future, EAMs will aim to adopt an efficient and centralised PMS, with an integrated CRM where they can recover the data flows supplied by their custodian banks. This integration will allow managers to benefit from a single tool, so that they will no longer need multiple parallel connections to different banking platforms.

Larger structures are showing an interest in being able to industrialise and automate order placement by relying on data flow from the EAM to the bank. Features such as “2-way PMS connectivity” or “Fix protocol” (international standard for electronic trading) also provide better connectivity between external asset management companies and the custodian banks. EAMs will soon be able to place orders with different banks from their own PMS. This will be an important factor in their choice of banking partners.

This digitalisation of processes goes far beyond portfolio management. Automated management control, for example, encompassing the “suitability test” that is required by MiFID II in Europe and will soon be required by the LSFin in Switzerland, and electronic archiving, in particular for digitising bank correspondence, are features that will reduce the administrative burden and allow valuable time to be invested for the benefit of clients.

Differentiating client experience

Technological developments will also provide a better client experience. In future, the market will offer external asset managers complete eBanking suites, including smartphone versions, that they can make available to their end clients. As part of a digital experience with intuitive, easy-to-use and customised applications, these services should help to bring the client experience to an unprecedented level.

The personalised, tailor-made approach that is at the heart of the relationship between asset managers and their clients will be strengthened.

The key to success lies in the ability to adopt new technologies in such a way that they bring real added value to clients. Digitalisation must be seen as a growth driver for wealth and asset management. In future, it will be an important differentiating factor for banks and external asset managers alike.