The roaring 20s: when the asset manager becomes a data manager

With the advent of a new decade, we expected the role of the asset manager to shift drastically. The arrival of big data towards the latter end of the 2010s brought with it a whole new phase of disruption.

Failure to adapt won’t just impact your existing client base’s investments.

Add to this the turmoil brought about by the coronavirus and the industry faces a rate of change that’s tough to comprehend and mitigating it can seem insurmountable.

The amount of data that the industry handles is unprecedented and continues to grow at a rapid rate, leaving some to argue that the data itself is becoming an asset class. According to PwC, we are on the precipice of $30 trillion transfer of wealth from baby boomers to their children – all Generation X and Millennials.

By the end of this decade, $4.1 trillion is anticipated to be inherited, specifically within the ultra high new worth segment. This new demographic of client is the most tech savvy and the generation that is pushing for change and disruption.

However, the wealth management sector still largely relies on legacy tools and processes and is widely recognised as one of the least tech-literate in the financial services industry. With the increasing pace of regulatory changes and the black swan effect that is coronavirus, now is the time for asset managers to re-evaluate their stance on data and technology if they intend to remain competitive.

Data is everywhere, and now considered to be at the heart of the asset management industry. Worth millions of dollars, big data enables smarter, more fact-based decisions to be made. But now that there’s a huge volume of data available and its value is increasing too, organisations are struggling to harvest, store and apply the data in line with the hyper expectations of a younger, more tech-savvy client base.

Therefore, data must be taken as seriously as the actual money that’s being invested.

This starts with storage. In times of strife, we often hear people say it’s important to work smarter, not harder and to use every tool at your disposal. As the coronavirus pandemic continues to impact global financial markets, the firms who’ll survive are those who are turning to tech providers. Over the course of this year, expect to see accelerated adoption of firms developing a robust, multi-cloud roadmap but if you’re thinking about this transition beware of the pitfalls.

No off-the-shelf solution is going to provide the security and continuity needed and it’s only by putting effort into identifying each individual firms’ security concerns, regulatory requirements and business needs that this will be a success. Not only will this help to create a more mobile workforce but one that’s increasingly on-demand and better equipped to service the needs of the new, tech-savvy generation.

Data management tools too, have a more important role to play. Machine learning algorithms have been used by hedge funds for years. However, this has not yet caught on in a huge way amongst the rest of the industry. Now is the time for companies to invest in data management technology to manage data sources effectively.

By doing so, firms will better understand the information they hold and be able to use it to boost their competitive advantage, it will also help them to mitigate risk. By using data science techniques, as well as artificial intelligence, they will see increased efficiency in understanding market dynamics, enhanced execution in portfolio management and significantly reduce costs.

But there are other key advantages to implementing data management tools. Not only can they support asset managers with fast and accurate decision making but they also enable firms to integrate and expand on a global scale in a more efficient way.

The biggest takeaway for firms right now is simple. If you’re slow to harness tech, you’re going to struggle to mitigate risk, improve efficiency, capitalise on your data, and in the current climate, there’s no room for error in the services you provide to clients.

Failure to adapt won’t just impact your existing client base’s investments, but also jeopardise your future clients, who are likely to plump for an asset manager who has chosen to welcome in the benefits of the cloud, harnessed the power of their data, and levelled up their advice and customer relations in one fell swoop.