Polish the gold medal and be future fit
In order to stay fit, an athlete must work hard every day and adapt to change. To stay in touch with global investment trends, and keep track of what clients are expecting worldwide, we attended FundForum International 2015 in Monaco earlier this year.
This is the world’s largest event for fund managers and global distribution partners with over 1 200 attendees. We do NOT go every year, but this year’s client centricity theme resonated with us as a business.
Taking a backseat
Speakers shared research that highlighted how investors are becoming increasingly aware that investment products are very different from cars and computers.
For example, investment products do not have a definable shelf life or replicable outcomes. Actual returns can vary markedly from expected returns, and investors are realising that putting blind faith in past performance numbers may also mean investing in products that cost too much and deliver too little.
That is why asset managers are shifting their focus away from product innovation towards solution innovation; even addressing problems that clients are not aware of.
A global trend
This is a global trend. In a study by Create Research, for example, 58% of the respondents cited the switch from products to solutions as the most important driver of innovation over the next three years.
Aligned with the client centricity theme at FundForum International 2015, speakers identified a number of enablers and three really stood out:
• Fintech;
• partnerships; and
• investor education.
Client enabler: fintech
Disruptors such as Uber, Airbnb, Betterment and Bitcoin were mentioned by speakers. II IS clear that technology is creating a wave that will change the shape of our industry.
Already low-cost online advice platforms, such as Betterment, Nutmeg, Wealth Horizon, Money Farm and Nordnet, are offering simple tools that help individual investors make asset allocation decisions.
Worth noting, is that for two of the platforms discussed, the average age of users are 47 years old and 48 years old respectively, showing that these robo-advisers are not being used by millennials only.
Although these platforms are putting pressure on the adviser-end of the value chain, we believe there will always be a place for quality professional advice.
On the other end of the of the value chain, crowd-funding platforms are connecting investors/funders with borrowers, providing investors the opportunity to invest in assets not normally available to retail investors. Retail clients are quickly becoming accustomed to receiving products and solutions at wholesale prices, putting the margins of financial service providers under pressure.
Client enabler: partnerships
The financial services ecosystem has a number of stakeholders who are interdependent on one another.
The world within which we ARE operating is now being disrupted by crowd influencers, opportunities to invest in assets not normally available to retail investors, a non consumption mind-set where big block buster brands are not the only attraction for investors and competitors are coming from all sectors, not only financial services.
We believe that this creates plenty of opportunity for redefining and strengthening partnerships across our value chain.
Client enabler: Investor education
Because so many investors have been following past performance blindly to such extremes that the bulk of global flows go into top star funds, the industry has unsurprisingly developed a blockbuster culture, focused on past performance.
This is not replicable and cannot form the basis of client decisions. It IS therefore crucial that investors receive better guidance on the implications of their saving decisions throughout their lifetime.
Where to go
Globally, one of the most noteworthy shifts is the one towards the client. This shift has changed how we think about what we offer and is also reshaping our industry.
We are confident that a concerted client-focused strategy will strengthen the value proposition of all parties in the industry that align themselves with this vision. Follow the trends, and stay on top of what matters.
