COVID-19 has accelerated technology development within the asset management business as managers moved quickly to reduce manual processes such as cheque production, equip employees with work-from-home technology and provide clients with remote access to services. The challenge will be to maintain this momentum going forward. It is essential for managers to continue digitizing and integrating their firms, employing advanced technology to leverage the growing stockpiles of data that are key to building an efficient organization and a differentiated client value proposition. Meanwhile, the increasing incidence of cybercrime may negatively impact manager confidence in digitization.
Catapulting the Digital Journey
In line with the intent of 61% of managers to focus on “digitization of manual processes” as a top technology investment (67% in Canada), Nobel prizewinner Joseph Stiglitz says the extra costs of COVID-19 are “accelerating the development and adoption of new technologies to automate human work”1 and Bruce Ross, Group Head of Technology & Operations at RBC, adds: “RBC’s digital journey was catapulted ahead and, just over a year after the pandemic began, we are anywhere between 24 and 36 months ahead of where we otherwise would have been.”
- 61% of managers
chose “digitizing manual processes”
as a top technology investment
Enhancing Productivity and the Client Experience
“Data analytics” is also one of managers’ top technology investment priorities (44%). The ability to glean insights from vast quantities of data through the use of advanced technology such as artificial intelligence (AI) holds the promise of significantly altering the asset management landscape, boosting productivity and enhancing the client experience. AI is fast becoming an important tool for managers to transform their businesses.
Mike Taylor, Head of Business Development at AlphaLayer, a Canadian-based technology development company that builds AI-based solutions for asset managers, draws on his firm’s experience to provide examples of how AI can benefit asset managers: “At its core, artificial intelligence can help managers make better decisions, automating manual processes and more rapidly processing vast quantities of data to enhance risk management, improve portfolio performance and augment the client experience.”
How are asset and wealth managers using AI?
- Create new datasets and predictive models
- Provide early signals for investment trading and risk management
- Address cyber and fraud risk
- Assess client buying behaviour
- Drive marketing efforts
SOURCE: AlphaLayer
Asset managers are also leveraging Natural Language Processing (NLP), an AI subgroup that processes unstructured text into actionable insights and helps digest the proliferation of text-based data. NLP applications include assistance in credit scoring, fraud detection, client service chatbots, and document search and processing for business intelligence.2
Transforming the business through AI
Adapting to the Unforeseen
An analysis by global asset management analytics provider Cerulli Associates found that AI-led active equity funds in Europe added assets at a faster rate than other such funds during the period January to April of 2020 and showed a less pronounced decline in March. The analysis indicates that “there has long been suspicion of the ability of AI to react to unexpected events, such as the coronavirus pandemic, but there is now a sense that technology has advanced to the point where it is better able to adapt to unforeseen scenarios via the ever-growing amount of market data available.”3
Eliminating the Patchwork
A recent wave of consolidation among asset managers has created a particular challenge as they seek to harness the swaths of data from a patchwork of different legacy systems that were inherited with the mergers and acquisitions. “Improving integration across the firm” has become a key objective for managers, chosen by 43% of survey respondents as a top technology priority.
Shying away from new technology?
A Threat to Good Intentions
Approximately a third of RBC I&TS survey respondents designated “data security/cyber resilience” as a top technology priority and more than a quarter of respondents view cyber and privacy issues as one of their top challenges (33% in Canada). This is likely driven by the growing incidence of cybercrime as an increasing number of technology devices are connected to networks and geopolitics becomes less stable.
The Economist estimates that cyber-risk has more than quadrupled since 2002 and tripled since 2013, and such nefarious activity has also become more global, affecting a broader range of industries. Work-from-home arrangements during the pandemic have likely compounded this risk. The direct costs associated with cybercrime are significant but the threat to technological advancement from declining confidence in technology due to cybercrime is also costly.4
As the digital world is increasingly plagued by cyber threats and ransomware attacks, including the Colonial Pipeline incident in the United States, the shutdown of hospital systems in Ireland and the cyberattack on Microsoft email servers across the globe, could asset and wealth managers begin to shy away from new technology and miss out on some of the potential benefits of automation, even though digitization of manual processes is deemed to be a top technology investment?
To what extent can you digitize the whole process, ensuring that you have the right controls in place and the necessary flexibility to incorporate changes? That’s a key question.
- Evelyn Foo, Consultant, Canada
We utilize data from our data lake to provide the CI sales teams with predictive analytics that support their business development efforts.
- Damon Sutherland, Senior Vice-President, Sales and Wealth Services, CI Assante Private Client, Canada
We’ve purchased a handful of businesses over the last five years, and our priority from a business perspective is to create an integrated, seamless product delivery to our clients wherever they may be.
- Anthony Messina, President, Guardian Partners Inc., Canada
1 The Economist, Is the Pandemic Accelerating Automation, June 19, 2021
2 Decimal Point Analytics, How Asset Managers are Leveraging Natural Language Processing Techniques, December 8, 2020
3 Cerulli Associates, COVID-19 Strengthens the Case for Artificial Intelligence in Fund Management, August 4, 2020
4 The Economist, To Stop the Ransomware Pandemic, Start with the Basics, June 19, 2021
