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Asset managers will survive digitalisation
15 May 2014
The potential for big technology firms to enter asset management territory is concerning but the industry has the resources to prevail, according to a panel at the Alfi conference. Stephanie Baxter reports
The emerging trend of technology and internet firms moving into
financial services is a challenge for the financial industry
but asset managers will still have a foothold in the investment
industry, according to a panel at the Association of the
Luxembourg Fund Industry’s (Alfi) annual London
When asked if Amazon would "eat up" his business, Sanjiv
Sawhney, head of global custody and alternative investor
services, Citibank International, said: "I’m not
sure [Amazon] will eat my business but let’s take
a step back. If you’re asking me whether companies
like Amazon are going to become players in the financial sector
[by] 2020, absolutely. Will they have been successful?
Yes they will."
Such firms have already started to compete with the banks in
payment services. Google has reiterated commitment to its
struggling mobile payments services business, Apply is expected
to expand its system and reports suggest that Facebook will
start providing such services later this year following
approval in Ireland.
Asset managers and the wider financial industry are now
becoming increasingly concerned about the potential for big
internet companies to penetrate their business fields.
Sawhney said that the success of any asset management firm in
the future will be driven by its ability to have information
data and access to a number of investors.
Technology firms don’t have all the accuracy of
data but "they have the building blocks to potentially mine
information", he added.
However, panel moderator Noel Fessey managing director,
Schroder Investment Management, said in response: "I think they
do [have the building blocks], but they don’t have
the kind of building blocks and expertise that you do when you
relate to your customers."
One area where technology companies could compete with
financial services firms is distribution. A number of
technology companies have become big distribution agents in
China. eCommerce giant Alibaba has successfully branched into
asset management, raising several tens of billions of
dollars in a very short space of time following the launch
of its financial product Yuebao in June 2013.
"These internet firms certainly excel in distribution and have
been destructive in industries such as the book industry for
example, and even the information industry," said Fessey.
Manufacturing is another field where such firms could try to
compete, but Shoqat Bunglawala, MD and head of international
product strategy and development at Goldman Sachs Asset
Management International, said that "on the manufacturing side
there is still a long way to bear".
Gad Amar, MD at BlackRock, said: "Digitalisation is a
tremendous challenge for all of our industry" but that it can
be a "fantastic opportunity if we find the right way to bring
advice to the end clients."
Fessey was optimistic that asset managers would survive
digitalisation. "Asset managers are bright enough", he said,
pointing out that the industry has adopted technology over the
past 40-50 years and "will continue to do so."
However, PwC said in a recent report that the inability of fund
managers to keep pace with technological change would open
opportunities for technology firms.