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Digital Strategies in Asset Management

Peter Ellis, Managing Director

Thursday 12 June 2014

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Quick Facts

BI-SAM overview

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Boston New York

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About the Speakers

Dr. Peter Ellis, Managing Director

Benedicte Godet, Director of Marketing and Communication Before joining BI-SAM, Bénédicte has been working for 5 years at PwC Luxembourg within the marketing and communication department, responsible for the Luxembourg financial market’s client events, publications and sponsoring. At BI-SAM, she is responsible for all marketing and communication activities globally.

With more than 30 years of experience in insurance, engineering, software development, and investment management, Peter is a knowledge leader in performance measurement and analysis. Prior to joining BI-SAM, he was Managing Director of Investit. He also spent 8 years at Deutsche Asset Management, where he held a number of roles in IT and in the business. In his last role at Deutsche Asset Management, he was Managing Director, Performance and Client Services. Peter has extensive project management experience on a wide range of projects, and has directed many complex strategic projects, both from within IT as a project manager and as a business sponsor.

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Agenda

Industry challenges

What are digital channels and strategies?

Specific issues for performance and client servicing teams

Delivering a step change in client experience without increasing headcount

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The times, they are a-challenging

The asset management industry is facing significant challenges, and investment managers are facing conflicting pressures.

Due to increasing pressures to remain profitable, asset managers need to reduce operating costs, yet still need to enhance the client experience to remain competitive.

May 28, 2014

Lowered profitability

Financial market volatility Increased regulatory requirements

Lower management fees

Asset management industry

“Numis analyst David McCann says earnings momentum could slow in the sector as its members wrestle with issues such revenue growth being lower than asset growth and reduced scope for margin improvement given their already strong profitability.”

Source: Investment Company Institute, Morningstar

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The times, they are a-challenging

Reducing operating costs: 1) Reduce service levels 2) Introduce economies of scale into

business processes

Enhancing the client experience: 1) Raise service levels 2) Delivering a less commoditised service

Managers cannot reduce service levels because of the need to enhance the client experience. Economies of scale are usually achieved by automating standard processing. But standardisation of business processing results in commoditised services.

Service levels can be raised by delivering the same service in less time or at a lower cost. Alternatively, a higher volume of services can be delivered in the same time or at the same cost. The only way to deliver a less commoditised service is to introduce a more customised or tailored service. There are cost implications for both.

The drive to reduce operating costs is taking managers towards more commoditised servicing. This is incompatible with the need to introduce a more customised client experience.

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Living in the digital world

Digital Channel Distribution Content delivery in a wide range of different media (HTML, audio, video and apps) without using physical media.

Delivery via the Internet: Direct via email or indirect via websites and social media.

Digital Strategy Description of the way a firm plans to leverage digital channels in order to enhance its business.

Scope: All client-facing activities such as marketing, sales, and client servicing.

Defines: • The business objectives that are to be achieved • The digital channels that will be leveraged to achieve the objectives • The type of engagement that will be delivered via digital channels.

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Living in the digital world

Travel

Shopping

Entertainment

Personal Finance

and nearly every brick-and-mortar retailer

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Living with the “Google effect”

The “Google effect” is the tendency to forget information that can be found readily online by using Internet search engines such as Google.

Google Effects on Memory: Cognitive Consequences of Having Information at Our Fingertips

Published, July 14 2011

“The advent of the Internet, with sophisticated algorithmic search engines, has made accessing information as easy as lifting a finger. No longer do we have to make costly efforts to find the things we want. We can “Google” the old classmate, find articles online, or look up the actor who was on the tip of our tongue. The results of four studies suggest that when faced with difficult questions, people are primed to think about computers and that when people expect to have future access to information, they have lower rates of recall of the information itself and enhanced recall instead for where to access it. The Internet has become a primary form of external or transactive memory, where information is stored collectively outside ourselves.”

This is changing client expectations of the service level that providers should deliver

We all expect more complex information to be supplied sooner and in a more customised way

Failure to meet this expectation is seen as diluting the client experience

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“The first step toward change is awareness……”

Digital channels are continually being leveraged in asset management

Retail Mutual Funds Online trade execution and

account review (in-house and 3rd-party e-

brokerage)

Private Wealth Management Mobile communication between

advisors and clients

Brokerage Fund screeners and

research reports

Wealth: • 76% of clients access bank

information via tablets • 56% via smartphones Hargreaves Lansdown PLC: • 55% of new business comes

through digital channels.

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“…...the second is acceptance”

Top ten global asset managers by AUM (as of 31/12/2013) Blackrock, State Street, Allianz, Vanguard, Fidelity, UBS, JP Morgan AM, BNY Mellon, BNP Paribas, Capital Group

Source: Bloomberg

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

LinkedIn Twitter Facebook Google+

Adoption rates of social media channels

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Consumer

• Intermediate point in a client servicing process.

• Receive information, process it, pass it on.

• Process = enrich, re-format, re-package.

• On the other hand is an end point in a client

servicing process. They receive information and

process it for their own needs, they do not pass it

on, changed or unchanged, to anyone else.

• Internal or external.

“Things may come to those who wait……”

Client

• End point in a client servicing process.

• Receive information and process it for their own

needs.

• Do not pass it on, changed or unchanged.

• Internal or external.

Key differences

Consumer

• Demand much more flexibility.

• Ad hoc requests – variable information, delivered

in variable ways, to variable people, at variable

times.

• Work to service consumers cannot be scheduled.

Client

• Agreement on what is to be produced, the format

in which it is to be delivered, and when & where

it will be delivered.

• Work to service clients can usually be scheduled.

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External Clients

Retail investors Private clients HNWI Pension schemes Insurance companies Other institutional clients Platforms

“There is nothing new in the world……”

Internal Clients

Heads of investment teams CIO Portfolio managers Executive management

Finance (for billing)

Internal Consumers

Client reporting Client servicing Account/relationship managers Marketing Sales

External Consumers

Advisors Platforms Distributors Investment consultants Plan sponsors

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“The future ain’t what it used to be”

Time

Volume

Req

ue

sts

for

info

rmat

ion

Type

Complexity

Frequency

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“Call out the instigator because……”

Web portals deliver a step change in servicing quality: • Enable consumers to decide what they want to see and how they want to see it • Empower consumers to drill down into further detail • Enrich information by immediate response At a reduced cost to managers

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Divide and conquer in the world of reporting

Commentary Holdings Returns Attribution Commentary Holdings Returns Attribution

Client Report Production Client Report Production

Trustees Investment

Director Risk Officer

Pension Manager The “Client”

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The asset management industry is experiencing a sustained period of challenge.

The need to provide an enhanced client experience is increasing as the expectations

of investors converge with their experiences of servicing in other walks of life.

Customised servicing is traditionally linked to higher levels of manual processing.

Digital channels offer managers the opportunity to deliver a step change in client

servicing without increasing operating costs.

In investment management, digital strategies are often seen as the province of

Marketing; in other industries they are also seen as an essential component of client

servicing.

Conclusion

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