Only the adaptable thrives in the new landscape of asset managers

Good advice, grounded on data and technology, is becoming a differentiator for companies that can provide it.

PUBLISHED : Tuesday, 13 June, 2017, 1:16pm
UPDATED : Wednesday, 14 June, 2017, 7:42pm

When Asia-Pacific leaders of many of the world’s top financial services companies gathered behind closed doors in Hong Kong a few weeks ago, the discussion centred on how our industry must change to meet the needs of millions of investors seeking a healthy financial future.

Global political instability and economic changes, driven in part by technology and innovation, are fostering uncertainty in financial markets. This has caused a rethink on how investors can seek to generate adequate returns and sufficient long-term savings.

Globally, in excess of US$50 trillion in cash is currently sitting on the investment sidelines as people try to make sense of new risk and return dynamics. Against this backdrop, it is the asset management industry’s responsibility to educate, digitise and innovate.

We must engage with our clients, counterparties and end-investors proactively around new technologies that will identify new sources of return, help in constructing improved portfolio solutions and evaluate risk across a broader array of both public and private asset classes. Those unwilling to adapt risk disruption, or worse, irrelevance.

This imperative is ushering in a new dialogue with clients who are looking to solve specific financial needs. They want bespoke outcomes that can be delivered through diverse investment platforms based on the right combination of investment strategy and investment building blocks. It has spawned innovations that provide new uses for market data and the evolution of artificial intelligence to expedite information processing and offer new insights that can underpin investment decisions.

Historically, asset managers have distinguished between active versus passive investment strategies. Now, these two strategies sit within the same portfolio. Passive investing has become yet another building block in creating cost-efficient, risk-adjusted portfolios.

Today, all investment decisions are active investment decisions. This is evidenced in the dramatic move to exchange-traded funds and efficient exposures that are being utilised alongside alternative asset class and private assets.

At the same time, technology and a focus on portfolio construction are driving a revolution in product distribution. Digitisation, online access and artificial intelligence, in the hands of savvy advisers, have become major tools for communication and investor decision-making. It is now possible to provide extraordinary levels of customisation that caters to diverse investor needs and preferences.

Even so, a recent BlackRock client engagement survey revealed that only 34 per cent of investors in Asia were using an adviser and only four in 10 of those were satisfied with the advice they received.

The survey also showed 73 per cent of investors now monitored their investments online and 70 per cent were willing to transact online.

Clearly, access to good advice, grounded on strong data and accessible through technology, is becoming a differentiator for companies that can provide it. Investment and risk management platforms, once only available to institutional investors, are now in the hands of wealth managers dealing directly with end-investors.

This accessibility is a significant factor in encouraging more engagement between advisers and their clients to take new approaches to investing.

The great news for investors in this part of the world is that Asia is at the forefront of many of these changes and is growing faster than any other wealth markets worldwide.

Economic, regulatory and policy reforms in many of Asia’s key markets will improve the quality of growth in the region. The fact that Asian markets remain largely underowned, underrepresented and undervalued provides opportunity for investors.

Our task in the asset management industry is to challenge ourselves to engage in new ways with clients, innovate and help them create better risk-managed and better-constructed portfolios for the long term. If we do so, both our clients and the industry will prosper in the face of great change.

Ryan Stork is chairman of Asia-Pacific for BlackRock