While it has already led to significant advancements in terms of trade execution, risk management and portfolio management, respondents to the survey said that these technological developments were considered largely to be just another part of the ongoing maturation of the sector.
However, the IA said: “A number of industry leaders took the view that the increased use of digital technology for communication particularly as younger savers feed through from the automatic enrolment market, will open up opportunities foe external players to enter the market.
It added: “The most likely contenders would be the large technology companies that have experience in communicating in this way and benefit from much higher levels of consumer confidence than traditional financial services.”
But, while the entrance of new players is a significant concern for the industry, many respondents felt that level of complexity of regulation and the increasing scrutiny on the asset management industry are a big enough barrier to new entrants from the technology sector in disrupting the delivery of asset management itself.
Thus, their role would likely be limited to the area of distribution. However, it was felt, that because online search engines are the first port of call globally for both general information and advice, such firms could have a significant head start over the asset management industry, especially as many of these firms already make very good use of big data to better understand their customers.
To mitigate this, the IA said: “a number of managers told us they were considering taking a more active role in the direct-to-consumer market. This is particularly relevant in light of the recent pension changes as many of those now approaching retirement but unsure how to invest may not be able to afford or may simply choose not to pay for advice.”
As one respondent said: “This is all about distribution. Having an iPhone app is one of the biggest opportunities and threats for our wholesale business and for the rest of the market because when technology becomes an end not a means – what a disruptor that would be to us.”
