Facing a rising challenge from a surging Pepsi in the mid-1980s, Coca Cola decided to fight back launching its very own “New Coke.” Despite receiving broadly positive reviews, the product flopped, and was – to excuse the pun – arbitrarily canned.
Providers of big data – such as the custodian banks – are facing a similar problem to New Coke, namely they have a perfectly decent product, but it is one which their asset manager clients are just not buying.
Experts at SIBOS in Sydney believe fund managers – many of whom are under enormous margin pressures in today’s modest return environment – are putting themselves at a competitive disadvantage or even risking disintermediation if they do not fully adopt big data.
Philip Goffin, global chief technology officer and head of blockchain at FNZ UK, said big data could provide asset managers with invaluable information about their clients.
“FNZ has a sophisticated data offering and we have been using predictive analytics for some time in wealth management, and we are able to give remarkable insights into consumers’ behaviour, like identifying how long people will stay in a fund, or the likelihood of individuals purchasing a fund based on their demographics or postcode. It is a real disappointment that asset managers have not fully embraced this technology,” he said.
By accumulating more information about end investors, asset managers could design their products more effectively and better tailor them according to underlying clients’ requirements, in what could help drive flows. However, others see cutting edge data as an effective tool to produce alpha. Sinclair Scholfield, SVP and head of sector solutions and consultant relations at State Street, said quick access to meaningful market data would be a return enabler for asset managers.
The effort required to integrate big data is a major factor behind the non-committal attitudes at asset managers. “There are a lot of reasons why asset managers have not incorporated big data. Legacy technology often makes it hard to extract data from historic systems, and massage and manage it, and turn it into something with meaning,” added Goffin.
Other participants at SIBOS were blunter, saying managers did not want to pay for data in the current, cost-constrained environment.
Even so, the panel acknowledged that asset managers needed to do more to preserve client relationships, as new, unencumbered and cheaper entrants increasingly compete for market share, some of whom are even charging zero fees.
“The traditional asset management model worked for a long time but the landscape is shifting. Asset managers will be forced to change and find new ways to appeal to the market and retain their clients,” said Scholfield.