As the rest of the financial institutions cope with digital disruption, asset managers have been taking a more relaxed stance to all things digital. We can’t blame them. The buy side traditionally has been a lot more laid back compared to their investment banking sell-side counterparts. However, not for much longer.
On the one hand, the long arm of regulation is catching up with them. For example, the MiFID II framework will now, not only apply directly to EU discretionary portfolio managers, but also UCITS management companies and EU AIFMs who manage separate discretionary accounts.
On the other hand, they are now being challenged by the Googles and Apples of the world, who are beginning to show interest in the money management business.
It’s therefore no surprise that foundations (and funding) are being put in place for a few key initiatives that will change the dynamics of the business significantly. Robotic fund management, known as “Robo Advisory” for short, is one of the key areas being explored by asset managers, as well as banks and insurers, who have an investment management arm. “Robo advisory” is broad term describing the process of automating the optimisation, management and offering of funds by the use of intelligent algorithms. This either takes away (or repurposes) the expensive fund manager, with chat bots and simple web forms, that help retail investors (initially), self-serve and avail, the same (in some cases better) investment advice at a fraction of the cost.
However, one must remember, that “robo advisory” cannot exist in a vacuum. From a technology perspective it requires a number of complementary disciplines to work in tandem including Big Data systems (that would store and provide all the historical, behavioural and contextual market data), AI/predictive systems that would actually generate the new optimisations and of course, new User Experience architecture, that would allow the consumer to seamless access information, interact with the system and alter their preferences/risk appetites from any device/platform of their choice. Hitachi Regulatory Data Management framework provides the platform to pull together all the necessary information for “robo advisory” activities, merge it with existing and external context and provide actionable intelligence for the “robo engines” to perform.
Just 27% of wealth managers polled offer robo-advisers, and only 31% use big data, while the adoption of revolutionary platforms like distributed ledgers is viewed as a distant dream.