Asset managers raise digital spend to meet client expectations

Opportunity

Asset managers are earmarking bigger budgets for digital transformation in the coming year, after many were shocked into action by the ‘stress-test’ their existing digital systems underwent during the coronavirus pandemic.  

Digital is ranked a top or high priority area by an overwhelming majority, 79 per cent of global asset managers, according to a recent survey by Alpha FMC. Over half, 55 per cent, expect their digital spend to increase next year. 

“This pandemic has posed a whole host of new problems to the financial services sector, but with these changes come a range of opportunities,” says Kevin O’Shaughnessy, head of Digital and Agile Transformation at Alpha FMC.

The study surveyed 40 of the largest global asset management firms, collectively managing over GBP17 trillion in AUM and operating across markets in UK, EMEA, APAC and the US.

Improving clients’ experience, along with their satisfaction and engagement, was found to be the first digital priority for most managers, followed closely by the pursuit of scale and cost efficiencies. 

Less than one quarter (23 per cent) of the asset managers surveyed believe that their current digital capabilities are meeting client expectations. 

Increased traffic to asset managers’ existing digital channels put pressure on their capabilities as the pandemic has progressed, and at the same time, demand has been rising from investors and advisers, looking for digital solutions they can access in real-time from home. 

Speaking to Institutional Asset Manager, O’Shaughnessy says that firms are looking to spend on the design of their client-facing systems, which tends to entail investment in people and in new tech. 

“There tend to be spikes of spend when managers are, for example, doing design work on the digital client experience, or designing a new agile operating model. This then creates follow on spend as a company brings in people to help execute those changes internally. Alongside this, choices on technology selection will then lead to additional spend in this area.”

Three quarters of asset managers say that less than 5 per cent of their workforce occupy roles that focus on the growth of digital. Over half (58 per cent) of firms dedicate less than 5 per cent of their operating expenses to digital transformation. 

He adds: “To make the most of this newfound demand for digital, firms who have long ignored requests for increased budgets from their CTOs and digital leads should take advantage of increased buy-in from senior leadership in order to instigate widespread cultural change across their organisations.

“While coronavirus appears to have shocked many firms into taking their digital transitions more seriously, there is still much work to be done across the sector in order to meet increasing client demands.”

The pandemic has been a wake-up call to some firms, alerting them to the fact that they might not be as far along their transformation journey as they had thought. 

As such, the majority (68 per cent) of firms now describe themselves as ‘getting organised’ on digitalisation – a 20 per cent increase on last year’s figures. Almost two thirds (60 per cent) of firms have already mobilised some form of digital transformation effort across their business.

O’Shaughnessy says: “Our findings indicate that the importance of digitisation has moved across many aspects of an asset managers business and is now equally relevant across all segments including institutional investors. Asset managers see that their clients have become accustomed to slick digital offerings in lockdown and want to see them rolled out further.”