Fund Servicing in the Millennial Age

Tushar Chitra
Vice President, Product Strategy & Marketing, Oracle Financial Services

Millennials comprise about a third of the global population and are massively impacting the way investments function. Since they’ve grown up as digital natives, they are certainly more inclined towards digital products, services, and lifestyle. They believe more in indulgence and direct control over things: no wonder then that trends like peer to peer lending and crowdfunding find greater resonance with this generation. The new modes of social interaction, comfort level with the latest technologies and confident vision towards investments that millennials present have been key drivers of recent innovations in the fund industry. Millennials are also more responsible and visionary investors when compared with their parents. They are 2x more active at sustainable investment than average and they not only invest based on their financial goals and requirements but also try to fit it into the larger scheme of things in terms of social, political and environmental implications. Impact investing is one of their favorite ways to plan money matters.

The Shift in the Industry

While millennials slide into the driving seat of the financial world, baby boomers are accessing their savings and investments to support their retirement plans. Regulations, on the other hand, are affecting all aspects of the industry right from fee structures to product designs to business models themselves.

These developments have certainly been driving a massive digital shift in the fund management industry. This also means the way fund managers deal with customer interactions, loyalty and long term relationships will all change to a completely digitized, less time consuming and hyper-connected modus operandi.

Several new age investment firms have started replicating millennial requirements into their products and solutions. Online fund selection, portfolio creation as per specific buckets and maintenance is now nothing new. But in the future, fund managers will need a truly digital approach to anything that is distantly related to fund management. According to a research by PWC, technology will be one of the key influencers in the fund servicing market and global investable assets for the asset management industry will increase to more than $100 trillion by 2020. This means that a large volume of fund transactions will rely on new age technology, innovative and connected systems and smart front to back integrations.

A Digital Heavy Future Awaits Us

According to a research by PWC, most of the fund management companies would have hired a chief digital officer by 2020. While currently, most asset managers are not much digitally involved apart from maintaining a website, by 2020, most of them will be involved digitally through social media, mobile phones and other digital media.

Big data, in future will play an important role in helping asset manager understand the requirements of their customers and offer products and services on the right channels at the right time. It will also help them price products in a more relevant manner and offer a more coherent servicing.

In an industry that has been oversupplied, differentiation leveraging technological advancements can make a huge difference. It is not a coincident then that the world’s largest asset management firms have been shopping robo advisor firms. One of the latest trends in this market is the entrance of new players from other industries who are heavy on customer data. Since there is a huge gap between the consumer requirements and the way the incumbents service them, there is a huge opportunity for new players in this market.

Use of self-service portals with great customer experience, and use of chatbots and automated advisors are some of the leading examples of how a digital shift is a prerequisite in the industry. This will not only increase the speed of servicing but will also free up the precious advisor time for more high priority customer interactions that need personal attention.

Asset Management Systems of Tomorrow

In order to gain cost efficiency and better revenues in this context, fund servicing firms need to choose their technology provider after doing a thorough requirement to capability mapping. The requirements of asset management firms might vary according to their size, market, and business model. The asset managers of the next generation will certainly need technology platforms that can facilitate their short term and long term business objectives. They will need:

  • Segmentation of their customers based on behavior on social platforms, previous records and future career and personal goals.
  • Digitally enabled prioritization of clientele as per their net worth and lifetime value and optimization of resources accordingly
  • Channel agnostic marketing and communication to percolate across segments of focus in the most timely and relevant manner
  • An automated fund servicing system that gives the fund managers the scope to learn from the past and grow fast.
  • A truly digital customer experience layer and a digitalized backend in order to ensure a seamless servicing and a great customer relationship lifecycle.

Fulfilling these requirements will not only need a scalable solution but will require the use of the latest technologies such as artificial intelligence and machine learning. A global vendor with localized focus and an eye to the future might prove a good partner in this journey to digitization.

Is your technology vendor supporting your journey to true digitization?

My colleague Shalu Upadhyay and I co-authored this blog. We would love to hear your views.  We are reachable at tushar dot chitra at Oracle dot com and shalu dot upadhyay at Oracle dot com







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