This is the second in a series of blog posts looking at the need for step change innovation in the technology used for all forms of client and market communications with all types of investors.
In this post we will look at how the distribution channels used by asset management organisations to market their products are changing, and at the challenges this presents.
Asset management – an industry under pressure
Asset management organisations are feeling pressure on a number of fronts.
Investors of all kinds are now more focused on outcomes than on markets. Examples of outcomes are: “a pension fund large enough to allow me to retire in 15 years” and “an income stream that will pay for my children’s college fees in 20 years’ time”.
Asset management organisations have to adapt the strategies they use to attract business; move away from pushing products out to the market and towards providing solutions for investors.
This is easy to say, and organisations are starting to say it, but it’s proving hard to do in practice.
Part of the reason for this is that investors are changing their behaviours.
Digital distribution – it’s real and it’s already here
There is a fundamental transformation occurring across all industries in the way that businesses engage with their target markets. It’s called digital marketing.
‘Digital marketing’ isn’t just a buzz phrase. It’s real, it exists, and you’ve almost certainly experienced it. For example, when you log on to your Amazon account you’ll find recommendations based on your previous purchases and on what you’ve looked at in the past. That’s digital marketing.
If you think that it’s not going to happen in asset management, you’d be wrong because it already has. The information provided on some wealth management platforms can be customised according to the preferences and interests of individual users.
Asset management organisations are very conservative when it comes to embracing new technology. But market pressure is a powerful force when it is driven by changes in consumer behaviours. And increasing numbers of investors want to engage with investment management providers via digital channels.
There is a tipping point for our industry that is not too far in the future.
Asset management organisations are waking up to this and trying to adapt to support digital distribution but many of them don’t know what it actually means or how to do it. Putting a PDF of a factsheet on a website is no closer to digital distribution than attaching it to an email, and not much further on from printing it out and posting it.
But traditional distribution channels are still alive and kicking
Asset management organisations need to fully embrace digital distribution, but they can’t forget about traditional channels such as product literature in bank branches and face-to-face meetings.
Different distribution methods have always been employed for different types of investors in different parts of the world. And this will continue for some years to come.
It is this need to support both digital and traditional distribution channels that is at the heart of the challenge facing asset management organisations.
Digital distribution isn’t an extension of traditional methods
Two key characteristics set digital distribution channels apart from traditional channels.
First, digital channels can tailor content at the point of engagement with individual consumers; they support bespoke content as well as customised content. Bespoke content is unique content, specifically designed for an individual consumer; customised content is a consumer-specific variation of generic content. It’s the difference between having a suit made to order, and buying one off the shelf and having the length of the trousers altered.
Second, digital channels support dynamic content. When fund holdings are presented as a pie chart via a digital channel, a segment of the chart can be expanded to see more detail. Investors aren’t taken to a different webpage, the extra detail appears right in front of them and everything is re-sized and re-calibrated to keep it consistent with what’s in the pie chart at any particular time.
Digital distribution is not a linear refinement of traditional distribution, it’s a step change in the customer experience.
The real challenge of digital distribution
To fully embrace digital distribution, product information must be provided according to the differing needs of in-house websites, investment advisor platforms, and 3rd-party distribution platforms such as fund centres. This requires information to be distributed as discrete components that can populate wireframe websites, CRM applications, and other forms of digital distribution.
The technology to achieve this has been matured in other industry sectors but the challenge of digital distribution in asset management isn’t just about embracing new technology.
All product information, however it is distributed, must be compliant with the relevant regulations for the jurisdiction in which it is distributed. That applies to digital channels as well as to traditional ones. But the compliance challenge is much greater for digital channels because product information is presented in a less formalised and less consistent structure, and in a more discrete form. Ensuring regulatory compliance of discrete information components at a jurisdictional level is one of the big challenges that asset management organisations face as they move towards the widespread use of digital channels for product marketing.
Most organisations are implementing a separate technology platform to support digital distribution. But if digital and traditional distribution channels are supported by separate technology platforms there will need to be a content management function somewhere in the operating model to ensure 1) consistency of information across all channels at all times and 2) full compliance with regulatory requirements in all jurisdictions down to the level of discrete components of information.
That’s going to increase the data management challenge, which the industry hasn’t fully addressed yet, by more than a couple of notches. Moving to digital distribution will lead to further increases in operational costs to ensure regulatory compliance.
Wouldn’t it be great if………?
It would be great if we could leave the old world of traditional distribution behind and emigrate to the new digital world. But we can’t, we have to cope with both.
And it would be great if digital distribution was just an extension of the traditional approach. But it isn’t. It’s a step change.
And we need a step change in our thinking to enable us to implement operating platforms that can support digital and traditional distribution, and that are both effective and cost-efficient.
Integrated Publishing Solution's iPlus solution is the cornerstone for organisations serious about building a digital strategy that will work today, tomorrow and long into the future. Read this success story to learn how a global asset manager enhanced sales productivity, transitioned distribution to digital channels and reduced operating costs.
Graham Duncan, CEO and Founder of integrate, has significant practical experience in providing successful integrated digital solutions to the Asset Management industry, from the world's first online portfolio valuation portal for Killik & Co, in the 1990's, through to the current global deployments of iPlus 3.
Dr Peter Ellis brings a deep understanding of the Asset Management industry. Managing Director at Deutsche Asset Management and, subsequently, Investit. Chief Operating Officer and Strategic Advisor to BISAM. Peter brings a remarkable depth of knowledge to the integrate team.
When we met them they came across as very convincing that they could do the job. I looked them in the eye and I trusted them to deliver - which they did. They are very professional and I can't recommend them highly enough.
Mark Smith, Managing Director - Investment Information Service, BNY Mellon Investment Management EMEA