Speaking at Linedata Exchange conference in London on Wednesday, Ian Lloyd, head of operations at TT International said the industry’s lack of investment in financial technology is because asset managers still predominantly cater to older generations, with average client age being 62.
“Most of the wealth that is being managed is old school, from the older generation not the digital generation.
“Once that begins to shift and it’s the digital generation whose money and pensions we’re investing then they’re not going to want the existing model with the fees and the opaque process. They’re going to want something different,” said Lloyd.
He also urged the sector to embrace fintech that will make “things quicker, simpler and more automated” and would including cutting out the intermediaries.
Regulation as a barrier
Lloyd accused regulators of “inhibiting” innovation in financial technology, urging them to give fintech firms a "grace period" to establish new practices and technologies before being compliant – similar to the regulatory ‘sandbox’ initiative launched by the UK’s Financial Conduct Authority (FCA) earlier this year.
“At the moment, regulation is very manual, box-ticking and onerous process. Regulators need to stand back and allow it [financial tech firms] to enter the market and establish itself before applying regulatory pressures,” he said.
However, Andrew Grill, a global managing partner at tech giant IBM, disagreed, arguing that regulators “love” new technology as a means for creating transparency within asset management industry.
“Regulators love innovation, they love new technology as it actually fosters development by pushing the boundaries.
“It also promotes transparency, you have regulation when there is a transparency issue,” he said.
Grill predicts the next “uber” idea – technology that will disrupt the industry and force it to change its business model – will be the fintech that will allow the sector to simplify its regulatory compliance process.
“If the unmet need is regulation then that’s where the disruption will happen,” he said.
Investment in robo-advice
Gary Brackenridge, the global head of asset management at Linedata, revealed up to 150 US companies are now spending $1bn (£680m, €886m) on the research and development of robo-advice – with half of the money being spent on how to bring advice to institutions.
As a result, he believes this leaves a “huge opportunity” for the asset management industry to develop its own automated services for the retail sector.
“I would love see fintech bring about the ability for an asset owner to buy a high-value transparent easy to consumer investment,” he said.