Design construct of investment management 4.0

With a spate of disruptive change dominating the business landscape, investment management (IM) firms remain struggling to keep pace with evolving client needs, unremitting competitive pressure, changing advisory models and emerging technologies.

Added to that, the quest for newer growth opportunities and superior return in a constrained market – afflicted with geo-political uncertainty and macro-economic situations, provides a less promising direction.

New business models from fintech and potential ‘amazonification’ of investment intermediaries are altering the entire structure of investment strategy and distribution model. Moreover, a flurry of regulations surrounding transparency, disclosure, risk standards and data privacy issues are adding new compliance burden – as ever.

The blog highlights a digital transformation approach guided by Business 4.0 construct. It enables firms to visualize the bigger picture and help to build a digital core supporting continuous innovation and gain a continuing competitive edge in the digital age.

The Business 4.0 Way

A recent survey by Gartner on CEO business priorities in 2018 and 2019[i] highlights that CEO priorities are shifting to embrace digital business as a part of the technology agenda. It appears amongst top three priorities for CEOs, besides growth of business and corporate structure strategy. Another survey from Alpha FMC[ii] – an asset and wealth management consultancy, focused to 15 of the largest global asset management firms (collectively managing AUM of $9.8 trillion) finds that almost 80 per cent of firms are prioritizing their digital transformation. Nearly 23 per cent of these firms feel that their digital maturity is “frustratingly fragmented”, constrained by the burden of legacy systems.

To exploit the opportunities posed by digital technologies and drive growth and transformation agenda, business firms need to formulate the vision of Business 4.0 framework. Contours of Business 4.0 paradigm underlines technology as the dominant force in reshaping the business.

Business 4.0 transformational journey of an enterprise can be successfully accomplished with its innate ability to mass personalize customer experience, actively leverage ecosystems, to embrace newer risks and to deliver exponential value.

Investment Management 4.0

When applying the core characteristics of Business 4.0 paradigm in the investment management world it presents a picture of many transformational possibilities. Reinforcing the key idea of the ‘whole is greater than the sum of its parts’, each dimension of the Investment Management 4.0 characteristics opens up a wide spectrum of innovation options.

Creating exponential value: Design of innovative investment product and services to enhance value enriching opportunities for investor groups and associated intermediaries. It can be a result of individual or combination of below-highlighted factors:

• Advanced Investment strategies supported with quantitative and AI enabled analytical techniques
• Non-formal data insights to identify investment opportunities in private markets
• Big data enabled Factor-based strategies
• Models factoring market specific sentiments and intelligence from alternative data sources
• Non-traditional business/operating model enabling direct customer engagement
• Inventive Investment risk management model

Leveraging ecosystems: Nurturing partners network to create integrated and value-added services across investment lifecycle and adding complementary capabilities in specialized products/markets/clients segments.

• Assimilating specialized & niche product capabilities
• Complimentary 3rd party asset allocation techniques
• Strategic partnership for localized services in specific markets
• Plug-n-Play services from fintech partners and innovative platforms

Embracing risk: Active risk awareness and susceptibility assessment of unknown/emerging risk sources becomes a core necessity. Additionally, newer abilities to embrace the identified risks (investment / operational / business) for the timely exploitation of investment opportunities and reaping enhanced investment returns.

• Tools to assess susceptibility from emerging risk sources
• Integrated and up-to-date (near real-time) risk awareness
• Opportunistic allocation / divestment strategy
• Non-conventional risk management metrics
• Adoption of disruptive technologies in investment operations

Embracing mass customization: Contextualization and tailor-made adaption of investment choices to suit the needs of investor groups as well as customized information access and intuitive tools. Enhancing the customer engagement and user experience journey, it recognizes each client requirement individualistically and provides flexible choices of personalized & custom-made product/services.

• Customer-centric Investment theme contextualization
• Customized workflow, dashboard and tools
• Contextualized Market Data, Performance & Risk Analytics
• Investment research and reporting with customer-centric preferences

Investment Management 4.0 paradigm helps firms to build a digital core to assimilate receptive business and operating models and to remain ahead of the curve. A complete overhaul of business processes supported by technology innovation and increased operational agility significantly enhances business gains. Enabling enhanced customer engagement and user experience for digital native investors, it creates a sustainable foundation to forward capabilities in the digital age.

The next post(s) in this series will analyze each dimension of Investment Management 4.0 characteristics and related spectrum of innovation options.

[i] https://www.gartner.com/newsroom/id/3873663

[ii] https://www.investmentweek.co.uk/investment-week/news/3030872/alpha-fmc-asset-managers-still-face-significant-challenges-implementing-their-digital-programmes

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