How boutiques can steal a march on their rivals in an increasingly digitalised world23 September 2016
In a world where people are comfortable using their smartphone for everything from online banking to booking a holiday, asset managers – both large and small – can no longer afford to ignore the possibilities of digital technology. Not only does a digital business give a firm scope to reach a wider range of clients, but automation translates into both a slicker service for customers and lower costs. This is an opportunity not to be ignored – particularly for those boutique managers looking to differentiate themselves in an increasingly competitive marketplace.
A key driver of increasing digitalisation is the millennial generation, which is becoming increasingly affluent and influential. Having grown up in a digitalised world, this group is tech-savvy and as such, their expectations are high. Research by Deloitte underlines this, suggesting that 57% would consider changing their banking relationship if another provider could offer a better technology platform
. So the direction of travel is clear right across the financial services industry – the next generation is moving online.
It’s not just millennials who are keen to take advantage of digital technology either. For the first time, over half (55 per cent) of those aged 65-74 have access to the internet at home while over three quarters (77 per cent) now have a mobile. This interest should not come as a surprise – a digital offering enables firms to provide a service to customers which is efficient, multi-functional and adaptable across a number of devices – yet a number of asset managers have been slow to take up the trend.
Appearances matter. Just as eyes are the windows to the soul, a company’s technological and digital footprint offers investors – particularly millennials – a real insight into what a firm is all about and whether it will be able to meet their needs. Firms without these systems risk giving the impression that they are out of touch and not serious about staying in the game for the long-haul.
Traditionally, there have been perceptions of digital as something just for the large fund groups. While some boutique fund managers have been good at taking advantage of new technology, others have struggled to keep pace with change. The latter have typically cited three reasons against upgrading: prohibitively high costs, constraints on resources which have prevented them from carrying out adequate due diligence or simply that digitalisation is not appropriate for their business. Whether their perceptions of these barriers are correct or not, the end result is that many firms have persevered with clunky, outdated systems and an expensive paper and phone based customer servicing model.
However, this is quickly changing. Increased automation and an industry wide move towards greater transparency is contributing to downward pressure on fees in the years ahead. This should enable digitalisation to help drive a more competitive solution for boutique managers. More up-to-date systems allow staff to cut down on burdensome admin tasks, freeing them up to do more productive and profitable work. This can quickly add up to considerable savings in time and cost. As well as this, these systems also enable smaller firms to capture client data in an accurate and meaningful way, which can lead to cross-selling opportunities.
These alone can help to offset the cost and perceived inconvenience involved with updating systems. It can also change the marketing position of the company, giving it the opportunity to expand its reach by linking with other digital financial service providers such as challenger banks.
Digitalisation does not mean uniformity – in fact, it allows a firm to differentiate its service and products to customers and brokers more efficiently. Advancements in technology have enabled providers to bring ‘lite’ solutions to market which allow smaller firms to use the same technology as larger fund managers, while still being customised to suit the specific needs of that firm. This effectively allows providers to standardise their technological capabilities but continue to offer a bespoke, personalised service to clients on an individual basis. It can also allow firms to gain national distribution immediately.
There is now nowhere for fund managers to hide. In an increasingly digital world, firms unable to adapt to the needs of clients on the technological front will struggle to survive. With the world of slick, affordable technology opening up to boutiques, there are no excuses not to dive in. Indeed, through digitalisation, the boutiques might even be able to steal a march over their bigger competitors and lead the market.