Edition: August/October 2018


A decade hence

What’s in store for the jobs of asset managers? Meagen Burnett, chief operating officer at Prudential Investment Managers, offers her predictions.

Having recently attended the executive program at Singularity University in Silicon Valley, I am left with only one certainty: work life and traditional human roles will become substantially different in the next decade.

The “exponential technologies” - machine learning, artificial intelligence (AI), 3D printing, quantum computing and blockchain – combined with Big Data, which acts as the catalyst – are fuelling unprecedented, exponential innovation. Traditional banking and trading markets are being disrupted by new low-cost technology-based entrants. These are changing some fundamental principles upon which traditional fund management business-operating models are based.

Simplistically, today’s investment management businesses consist of four core components: the investment team; client functions that include marketing, sales and distribution; administration (transfer agency and fund accounting), and corporate support functions such as compliance, human resources and finance.

The most obvious and progressed changes globally are in the administration (transfer agency) and downstream bank (payment) integration processes. Here we see an increased use of workflow tools and robotic process automation (RPA). They have changed the roles of administrative staff from manual preparation of transactions and reporting to process-exception management and oversight.

Globally there are a number of consortia working to leverage the full potential of blockchain technology. It will completely redefine the reconciliation and asset/liability recording aspects of fund administration.

On client-facing functions, we’ve seen a shift towards the use of technology to better understand clients’ needs, leveraging the combination of Big Data analytics and social media to reach clients more effectively. The skills associated with this behavioural data analysis and digital marketing are all relatively new to the traditional investment manager.

Burnett . . . radical changes

Across “distribution “, one of the largest parts of the fund value chain, we’ve seen early entrants trying to disrupt via the use of AI and roboadvisors to move their offerings closer to the advice model. Today these models are largely basic. But, accompanied by the increase in understanding of data and AI pattern recognition, they are likely to improve.

Distribution platforms and advisor capabilities of customer relationship management are evolving with technology. The potential for a fully technologicallybased LISP (linked investment service provider) is well progressed. Client service models are starting to leverage the capabilities of AI to build out smartquery management via machine-driven “chat bots”.

The impact of these innovations could ultimately mean that staff in service centres will be replaced or at least complemented by the equivalent of a “google assistant”. Conversely, it also means a rise in the number of staff focused on building out the technology and equipping it with the corporate communications skills of tonality, brand and technical nuances specific to that manager.

As for the investment team, passive management based largely on technology has grown extensively over the past five years. This trend is likely to continue as processing power and automation improve efficiencies and allow broad commoditisation of products.

Trading has also moved from the traditional human broker to a machine-based algorithm executing the best deals at the highest frequency. In the active investment management businesses, we are likely to see an increased use of machine learning/ AI improve the speed and breadth of data that is analysed within the existing investment processes.

Internationally there is an emerging trend towards analysis of investor sentiment (i.e. what the market “feels” about a company) on open networks such as Facebook and Twitter. This information will be consumed by AI and readied for decisionmaking. In an extreme scenario, AI will be used to make the end investment decision and robotics used to execute the trade in the market. The most likely scenario is that the combination of AI analysis and human decision-making will drive the best investment results.

Meanwhile, corporate support functions will operate more efficiently. Blockchain and the evolution of smart contracts are likely to have a significant impact on legal, financial and compliance roles. Corporate risk managers must be agile to ensure that they maintain the relevant skills to help the business navigate through the change in a way that ensures stability.

The role of human resources will be more important than ever. The balance between attracting new talent, re-skilling existing talent and retaining corporate identity will be key in helping a business adapt successfully.

How fund managers respond to these changes– invest in the re-skilling of staff and manage client expectations – will define their futures. Technology used appropriately will augment the existing human process, enhance opportunities and hopefully result in better products for investors.