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OPERATIONAL EXCELLENCE IN ASSET MANAGEMENT STARTS WITH DIGITAL TRANSFORMATION
OPERATIONAL EXCELLENCE IN ASSET MANAGEMENT STARTS WITH DIGITAL TRANSFORMATION
OPERATIONAL EXCELLENCE IN ASSET MANAGEMENT STARTS WITH DIGITAL TRANSFORMATION

Exploring innovations to streamline processes and drive performance in asset
management

Exploring innovations to streamline processes and drive performance in asset
management

Operational excellence in asset management starts with digital transformation

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 * Home ›
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 * Operational excellence in asset management starts with digital transformation

Article Posted date7 February 2023
5 min read

By all measures, the year ahead could be a challenging one for businesses in the
investments area. As pandemic restrictions lifted and the economy regained
speed, interest rates were expected to increase, but not to today's
unprecedented heights. Alongside inflationary pressure and geopolitical
challenges, it's clear that economic uncertainties may translate to a lower fee
environment in the months ahead.

For asset managers to remain competitive, continued innovation is a must. KPMG's
annual Asset Management Opportunities and Risk report shows where Canadian asset
managers see the biggest opportunities to grow and improve is through technology
and where they’re likely to direct their digital / technology related spending.

Over half the asset managers we talked to identified digital transformation and
embracing technology enhancements to operational processes as an opportunity
ahead, not only for their own organizations, but for the industry overall. As
most asset managers have made substantial technology investments over the past
few years into digital distribution and customer service, this was expected. Now
that those investments are starting to bear fruit, the big decision is where to
double down and what digital assets might warrant decommissioning.


USING DIGITIZATION AND TECH TO MANAGE COSTS

With markets and assets under management (AUM) revenues trending downwards,
firms are looking to lower costs in any way they can. Digitization and
technology are expected to play a significant role in cost optimization and
streamlining in the months ahead.

Large pension plans and institutional investors have been innovating, but
incrementally, with multi-year digital transformations. They’ve also gone
through a lifecycle of insourcing investment to add private strategies to their
total portfolios, and made corresponding technology updates to their back
offices. Today’s new challenges are driving a re-assessment of the speed and
scale of digital achievements to date. Many businesses are considering adding
more technology to streamline operations and run their organizations.


HALF THE ASSET MANAGERS WE SPOKE TO IDENTIFIED LEGACY SYSTEMS AS A RISK TO THEIR
OWN ORGANIZATIONS

Half of the asset managers we spoke to identified legacy systems as a risk to
their own organizations, and nearly the same number saw them as a continued risk
to the industry overall. Legacy systems have certain data constraints which can
delay, impede and possibly increase the cost of effective investment into
application development or digital experience initiatives. Firms with less
mature digital strategies are likely to address any gaps by increasing
investments in new technologies. Organizations with more advanced digital
strategies and technological capabilities can offer better user experiences,
create efficiencies and reduce operational risk, and work more effectively with
outsourcing partners.

Consistently, managers identified fund accounting, trade and settlements, and
transfer agents as key back-office areas ripe for technology investment in
2023.  In the middle office, optimizing customer relationship management (CRM)
and creating a single source of truth for investment data will be a key focus in
the immediate term. Technology improvements across risk and compliance functions
and in the client on-boarding process may also help improve operating efficiency
and reduce investment related risks.

Leaning in to top tech

The leaps and bounds in technology over the past three to four years have been
truly astonishing, particularly in artificial intelligence (AI), machine
learning, and natural language processing (NLP). Asset managers increasingly
grasp the importance of those innovations in their businesses and have
sufficient capital to make systems upgrades. Many will harness tech-enabled
analytical power to launch and differentiate products, reach investors, and use
funds more effectively.

Many of the largest players in the sector have adopted a total fund management
(TFM) approach, which involves managing risk and asset allocation across public
and private investments. To be effective, however, TFM requires better data. As
a result, we expect to see asset managers looking to higher tech solutions for
better data analytics and predictive capabilities.

The past few years has seen considerable merger and acquisition activity, and
asset managers are seeing the benefits of technology to facilitate post-merger
integration. Over the longer term, we expect to see AI and machine learning
become more embedded in risk analytics and the investment process for efficiency
and performance gains across the board.

Strengthening cybersecurity

While cybersecurity was identified as a risk for organizations and the industry
overall, it does not stand out as an exceptional risk area. The fact is,
organizations are managing so many heightened economic risks that cybersecurity
has dropped out of the headlines. Still, it is a significant risk area for asset
management companies to keep top of mind. The asset management firms we spoke
with demonstrate nearly unanimous commitment to increasing cybersecurity
investments over the next year, two years, and five-year periods.

Customer appeal remains crucial

In terms of opportunities ahead, many asset managers we talked to see focusing
on their customers as a crucial area, whether increasing the penetration of
their existing client base or reaching new investors, both institutional and
retail. As customer expectations grow and evolve, we can expect to see continued
investment in front-end client experience enhancements, including more digital
touchpoints, better access to reporting and assistance, and a wider range of
customized solutions.

As competition from self-serve and alternative investment platforms increases,
asset managers will be compelled to invest in digital strategies to reach and
retain younger, millennial investors. Alongside optimal CRM solutions,
investment in data analytics will provide industry leaders an ability to better
respond to evolving client journeys across ever smaller demographic cohorts.

Another driver of digital capacity that comes through in our discussions with
asset managers is the renewed focus on managed accounts. Customizing portfolios
to meet individual client needs and long-term objectives requires innovative
technology and digital capabilities for actionable information on valuations,
liquidity and secondary market transactions.

Technology for the long-term

With the market as it is, asset managers will need to be both creative and
patient to weather the storm and deliver the investment performance customers
expect. Technology investments will be crucial to both achieve stability and
maintain a competitive edge. Better data translates into better products and
technology integration brings cost reduction opportunities.

> “As people dig in for the downturn, the critical question moving forward is:
> ‘How can I preserve my top line and take cost out of the system without
> compromising my operations?’ Today, the best way asset managers can answer
> that question is with greater digital capacity, strategic technology
> integrations, and deeper insights from better data.”


David Bardsley

Partner, Advisory, Management Consulting, Wealth & Asset Management

KPMG in Canada

Looking forward, a key consideration is to keep the channels of communication
with investors open. Their portfolios will be affected by markets, so helping
ensure they are aware and informed is important to maintaining trusted
transparent relationships. From a technology perspective, those same
conversations tell you what your clients are interested in, which helps focus
and maximize CRM investments. Doubling down on data analytics can also help you
understand client journeys better and customize products and services to meet
their needs.

KPMG's Asset Management team can help future-proof the road ahead, with a
tailored technology strategy for your business and implementation support.


INSIGHTS AND RESOURCES

Navigating the ESG asset management landscape
Navigating the ESG asset management landscape
4 min read

New strategies for sustainable investing in a rapidly evolving regulatory
environment

New strategies for sustainable investing in a rapidly evolving regulatory
environment


The future of wealth and asset management
The future of wealth and asset management
4 min read

The road to success is holistic, hybrid and digitally enabled

The road to success is holistic, hybrid and digitally enabled


Hybrid hits home
Hybrid hits home
11 min read

Asset management steadies the course with flexibility, talent, and exceptional
service

Asset management steadies the course with flexibility, talent, and exceptional
service


ESG and asset management: Tax in the picture
ESG and asset management: Tax in the picture
ESG and asset management: Tax in the picture
5 min read

Keeping ESG's tax implications in the investment conversation

Keeping ESG's tax implications in the investment conversation

Keeping ESG's tax implications in the investment conversation


Eye on the digital prize: Tech strategies in asset management
Eye on the digital prize: Tech strategies in asset management
Eye on the digital prize: Tech strategies in asset management
4 min read

Cyber and customer experiences driving asset management investments

Cyber and customer experiences driving asset management investments

Cyber and customer experiences driving asset management investments


Investors want balance and asset managers are listening
Investors want balance and asset managers are listening
Investors want balance and asset managers are listening
4 min read

Shifting investor interests are driving new product strategies

Shifting investor interests are driving new product strategies

Shifting investor interests are driving new product strategies


Reimagining Asset Management: Asset management...
Reimagining Asset Management: Asset management opportunities & risks 2021
Reimagining Asset Management: Asset management opportunities & risks 2021
1 min read

KPMG's 6th annual Canadian asset management industry opportunities & risks
report

KPMG's 6th annual Canadian asset management industry opportunities & risks
report

KPMG's 6th annual Canadian asset management industry opportunities & risks
report




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