Asset managers will need to invest heavily in their digital offering amid a generational shift among savers and advances in technology, says Martin Gilbert, chief executive of Aberdeen Asset Management.
Speaking to AsianInvestor about the future of the asset management industry, Gilbert pointed to financial technology (fintech) firms as at the heart of this story. Such start-ups provide software solutions to financial services firms.
Gilbert is putting his money on a wave of new partnerships being established between asset managers and fintech firms, although he does not rule out acquisitions also.
“The asset management industry has suddenly woken up to the fact that fintech is going to be a big part of our business,” said Gilbert.
He cited forecasts indicating retail investor spending via smart phones online would increase five-fold in 10 years. “There is going to be a generational shift of savers who want to be on a smartphone to access their investments and buy and sell online. There is going to be a massive change [in the industry] over the next few years.”
Traditional managers such as Aberdeen are under twin attack. On one hand a surfeit of portfolio information is being made publicly available, empowering individuals to make their own investment decisions (micro investing) via digital devices.
At the same time, the rise of wealth management start-ups offering automated advisory online at low cost underscores demand for transparency and ease of use. This is discretionary management for the masses.
Micro-investing is expected by some industry players to explode, although solutions would need to be found to solve regulatory restrictions in areas such as know-your-customer (KYC) and anti-money-laundering.
“In the West you can no longer just go and buy a fund online as it comes to a grinding halt because of KYC,” said Gilbert. “That is where big improvements in the industry have to come in the next 15 years, where there has to be a way for the industry to get over this.”
Nevertheless, he agreed that investors of the future would expect instant portfolio access. “Asset managers as a whole are going to have to become much more savvy on digital,” he added.
“Either the spend is going to be massive by asset managers, or there is going to be a lot of money made by fintech companies that are going to provide the solutions for us [asset managers].”
Last year Aberdeen Asset Management set up an innovation committee to focus on future opportunities. “It has made people think about what is going to happen,” Gilbert said. “You have to have people of the right age on the committee, rather than people who think the world won’t change.”
But far from banks being disintermediated in future, Gilbert is of the view that banks will be well placed to sell low-risk, low-cost products such as money-market funds to customers directly. “It will move much more towards passive at that point,” he said.