ALFI Global Distribution Conference 2017: The talking points
The 2017 edition of the ALFI Global Distribution Conference was again a great success. As a new feature, the event heralded the launch of the MackayWilliams Distribution Achievement Awards. Here’s an overview of three of the many key talking points.
Brexit: The debate continues
Progress on Brexit negotiations has been wanting and this is testing the patience of investors with European and UK exposures. Nonetheless, there is a firm belief that a UK ‘crash landing out of the EU’ or a retreat into isolationism is in nobody’s interests.
Pierre Gramegna, minister of Finance for Luxembourg, pointed out that Canada, Japan and the US, all had successful trading links with the EU despite their non-membership of the Single Market. “It is crucial we adopt a constructive approach towards trade and finance in light of Brexit, and there are multiple models available to the UK”, said Gramegna.
Disruption: Controlling costs
Technology and disruption were major themes throughout the ALFI Global Distribution Conference as the funds’ industry increasingly grapples with innovation. The growth of passive products and regulatory requirements is forcing active managers to identify ways and means by which to rein in costs. Many fund managers recognise they need to make radical improvements to their technology if they are to remain competitive in today’s markets.
Innovations such as Blockchain and Artificial Intelligence (AI) are undergoing beta-testing, with proponents suggesting the technology could simplify archaic processes such as regulatory and investor reporting, and streamline cost-intensive and people-heavy middle and back office functions. This would ultimately help active managers drive down their overheads.
“Technology is now front and centre in asset management with growing interest in AI, machine learning, Blockchain, RegTech and predictive analysis”, said Jim Fitzpatrick, president of NICSA. All of these concepts could enable huge efficiencies and make the industry far less capital intensive than what it is today. Some reports have suggested up to 90% of jobs in asset management could be automated in the next decade, according to the statement of one of the participants.
A number of experts have questioned the rationale of targeting low income millennials advising asset managers focus their marketing efforts on more reliable and affluent client prospects. Such arguments are short-sighted and could put asset managers in a commercial jeopardy over the coming years.
“In 2020, millennials will comprise 60% of the world, and they will be contributing to savings and pension funds. In 2015, investable assets among millennials stood at $17 trillion, but this will increase to $24 trillion by 2020”, said Bob Kneip, founder and Chairman of KNEIP.
Digitalizing the distribution is an undergoing and mandatory process to get a footing in the tech-savvy millennials’ market. Disruption is already underway in China for instance, where Alibaba’s Yu’e Bao fund has amassed around $165.5 billion in assets, with many of his end clients not being mass affluent investors or institutions.
Others believe online robo-advice, a product that is low cost and easily accessible, is a novel tool to stir millennial interest in asset management. A study produced by Calastone, for example, found 42% of respondents expected robo-advice to be the dominant distribution channel for raising assets from mass retail. But the immediate success of robo-advisers is not assured.
Communiqué par l’Alfi