In Alpha FMC’s 2023 Asset Management Digital Readiness Survey, we surveyed 50 of the world’s best known asset managers who collectively handle $34trn on behalf of clients.
This year’s study, the 6th edition of Alpha’s Digital Readiness Survey, was carried out against a backdrop of market volatility and turbulence – creating intense competition, pressure on flows and a focus on cost/income ratios.
The survey highlights how managers have moved from some of the firefighting that was a hallmark of the Global Pandemic (such as access to content, products, & services through digital means). This phase is now more about deploying digital capabilities to address challenges like being able to scale and drive productivity and efficiency gains, which current market conditions are calling for.
Firms see the development of their digital capabilities as a major contributor to achieving these goals.
Are firms making progress?
The overall level of digital maturity of asset managers is not moving as quickly as hoped
Whilst the vast majority (92%) of firms see digitisation as one of their top priorities, we have not seen a significant up-tick in digital maturity across the firms surveyed. The headwinds cited for this include; organisational challenges, access to data and the level of investment. As a result, 56% of firms are positioned in the middle ground of building ‘Good Digital Foundations’, a percentage that has remained broadly static over the last two years.
The six themes from this year's survey
There are six main themes from this year's study which cover a mix of headwinds and tailwinds
Adoption of digital channels is growing
Firms are seeing an increase in the usage and adoption of their digital channels. In particular, we see more positive views about the role of secure client portals. The features and functionality of client portals have broadened beyond static reporting, and firms are seeing the role they play across a mix of business development and servicing activities.
Innovation is back on the agenda
Firms are looking for the next big thing, with artificial intelligence (AI) and machine learning (ML) seen as game changers. 82% of firms now have either live or planned projects in this space and the media hype surrounding ChatGPT is accelerating this push. The innovation agenda also extends to topics such as the tokenisation of assets and automation, but these are currently overshadowed by the media hype around Generative AI.
Spend is going into the client facing areas to support commercial targets
Given the focus on winning and retaining clients, the majority of planned spend is in the client facing areas (digital experience, sales enablement etc) and advanced use of analytics. This focus extends to other client-related areas such as onboarding and client reporting which are widely seen as processes that could benefit from improved digitisation and automation.
Budget challenges have become heightened
The current environment means that budgets are tight. Whilst 93% of firms cite digitisation as being a key priority, the reality is that 75% of firms said they would try to do this on flatline or declining budgets. Whilst much of this is due to meeting cost targets across the firm, in some cases, it is also due to budgets being reset after 1-2 years of transformation spend. As such, the picture isn’t quite as bleak but there is no escaping that, more so than ever, digital projects need to prove their commercial value.
Organisational challenges can hamper progress
In this year’s survey we see a number of organisational themes being flagged as the main challenges that firm’s face in terms of making good progress on their digital journey. Number one in this is the organisational set up and governance structures. This includes a mix of changing roles and accountabilities between teams (e.g. sales and marketing) and how firms are setting up their Digital Change activity (e.g. moving to long-standing product teams). Firms also note the focus on talent, and accessing scarce skill sets such as data science and digital experience. The other area highlighted is that a change of culture is needed (ranked #3). In this, firms recognise that moving to a “Digital 1st” model requires shifts in thinking and mindset, which can take time, especially given the traditional nature of the industry as a whole and how firms have operated for many years.
The “last mile” of data
Whilst we see firms have generally made good progress in their overall data management capabilities, our survey found that getting the “last mile” in place to expose data to clients via their digital channels or for use in predictive analytics continues to be a challenge.
Where are firms investing and what benefits being they looking for?
The spending priorities included in this year’s survey show how firms are investing in a mix of initiatives to support revenue targets but also to help drive improved productivity and create cost efficiencies.
As mentioned above, many firms are focused on the client side of an asset manager and making improvements to the digital client experience to support client retention and acquisition. In addition, firms are prioritising investment in digital analytics to capitalise on the additional data that accompanies greater levels of traffic. Finally, firms continue to look at ways to automate and streamline processes, which can not only create efficiencies but also support improved client experiences.
To unlock these benefits, firms need to determine how to scale and make the best use of scarce and sought-after resources whilst also attracting and retaining clients. Digitisation will be vital to answering these questions.
What’s Next?
From the survey findings and our client discussions, we can see that firms are juggling the need to do the basics well and simultaneously create the capacity to progress both safe bets and more experimental innovation activity.
The firms who are able to unlock this capacity will do so by creating a vision for the future that is supported by a coalition for change across the firm – they will be driven by a clear, prioritised roadmap that supports strong and measurable execution.
In summary, firms are facing challenging market conditions which are limiting the level of investment they are able to make into digital development and innovation. This is forcing firms to focus on the highest value initiatives to get maximum return on investment. At Alpha, we have a strong track record of supporting clients on their digital journey, from developing strategies and operating models, to design and implementation, we are able to help clients get the maximum value on investment into digital.
If you would like to find out more about this year’s Digital Survey or how Alpha can help your organisation, please reach out to us here for more information.
About the Authors
Kevin O’Shaughnessy
Executive Director and Head of Digital & Agile - UK & Europe
Kevin is an Executive Director at Alpha and leads our Digital & Agile Transformation activity in UK & Europe. He has over 20 years’ experience of driving digital and client-centric transformation across the financial services sector and in particular in the wealth and asset management space. His experience covers the full range of digital topics from strategy to execution which have deployed with a range of asset managers supporting a mix of institutional, wholesale, retail and end-investor audiences.
Mark Webb
Senior Manager
Mark is a Manager at Alpha and has over 9 years experience in Investment Management, with significant experience advising Asset and Wealth managers on Digital and Distribution strategy. Mark has helped a number of clients across all areas of the Asset Management value chain, regularly covering client experience design, target operating model design, digital strategy and digital technology implementations.