Fund Distribution: unlocking the power of data
Do you feel like you are drowning in a daily deluge of communication? And yet it is getting harder to get to the information you really need? In an industry like asset management and in the arena of fund distribution, this is ever more prevalent.
On the one hand, the industry is highly regulated, with the requirement to report and control in detail – know your client, FATCA and CRS reporting, MiFID II checks. On the other hand, it is also highly intermediated, with many players between the end investor and the fund. This can make an apparently simple task such as understanding your distribution footprint incredibly complex.
Bruce Springsteen sang of ‘Dancing in the Dark’ but could asset managers be ‘distributing in the dark’? Much discussion has been had regarding the need for data across the industry and the value it can bring. At the same time, it would seem that management companies are the recipients of masses and masses of data. Whether it concerns daily activity reports or regular regulatory reporting, the sheer amount of data exchanged between industry participants can be overwhelming. Could it be that the key to managing your distribution is not linked to the volume of data but rather to how it is organized?
Two factors are driving change – consumer behaviour and new technology. New investor behaviours are leading banks to rethink the client experience. The true value of data is being highlighted. Tech-savvy investors are seeking solutions that are tailored to their specific needs. To achieve this, product producers require information about the client and their goals, but also the trends for investors seeking similar investment outcomes. Are asset managers getting the information they need on these trends to allow them to respond? And if they are receiving this information, is it presented in a way that is easy to digest and interpret? Crucially, is it updated frequently and quickly enough to respond?
The challenge for asset managers is not straightforward. Fund distribution is a highly intermediated industry. The path between from the consumer to the producer is a long one. Platforms, nominees and market infrastructure can obfuscate the distribution chain. To gain insights, it is necessary to build a hierarchy of data to enable a look-through to the underlying data.
Digitalisation is finally delivering tools that could make this transparency possible. New technology allows for more efficient collection and processing of ‘big data’ and its restitution in bite-sized chunks.
Heterogeneous data can be leveraged to produce deeper insights. Applying artificial intelligence to these datasets can bring interaction with the information in new ways – via chatbots and natural language processing among others.
The potential benefits are clear. If you can see day-by-day, week-by-week, month-by-month how clients are behaving, it offers a tremendous opportunity for asset managers. In fact, it operates like continuous feedback on the product range. This in turn allows asset managers more freedom to innovate – offering the agility to know when strategies are performing well but also to quickly adapt when new solutions are called for.
The key is to channel the deluge of information in order to be ready for the challenges ahead. In the new environment, effectively managing and utilizing data could well make the difference whether you will ‘sink or swim’.