Digitalisation, death, and taxes: Get ready for the inevitable digital transformation of the asset management industry

The arrival of digital platforms and other technological advancements has sparked a lively debate in the asset management industry. This was well demonstrated at ALFI - Association of the Luxembourg Fund Industry ’s flagship Private Assets Conference last week.

The most provocative question of the day?

"Is digitalisation in this industry a sustainable innovation or just another complex disruption?"

Circa 80% of the asset management industry stated that they are either currently using or looking to use technology solutions to scale their businesses. That’s a considerable percentage.

The overarching consensus I observed was that, while technology is inherently disruptive, it provides sustainable solutions to an industry crying out for increased transparency and efficiency.

Yet those actors wanting to develop their technology use are invariably the same actors citing difficulty in converting enquiry into actual demand, let alone deployment.

One barrier to progressing with technology implementation is a need for clarity regarding which tool on the market is suitable for which task and how these tools can be adopted in practice. For example, Blockchain and tokenisation have long been touted as the be-all and end-all. However, other low-code solutions are often more interoperable with firms' existing IT stacks and, thus, less disruptive.

Understanding data can be another issue asset management institutions must address to determine how to best approach technology advancement. With numerous fund structures and inconsistencies in the quality and availability of data, you first need to organise and understand which information you have before digitalising and streamlining associated processes.

FinTechs need to play their part in educating the industry on which tools best suit their pain points and how to approach technology deployment for each unique use case.

Meanwhile, FinTechs are contributing to this ultimate sustainable innovation, leveraging their agility and more significant risk appetite to try out different operating models and develop meaningful solutions to the industry's problems.

The innovation we see in the FinTech industry, particularly in Luxembourg, will help to drive down cost to serve and bring about a more streamlined value chain. In turn, this will help render redundant the perception that digital asset management platforms are disruptive.

Such perceptions are a symptom of what has historically been the most significant barrier to technology implementation - human resistance to change. However, as one ALFI panellist reminded us:

"Change is a fundamental inevitability, like death and taxes".

Another inevitability to consider is the continued rise of FinTechs and their relentless pursuit of innovation and digital transformation.

Having recently joined this industry, I am super impressed by the contagious passion and motivation of the FinTech community to foster the industry's transformation.

?What about you: Do you think new technology is disruptive or sustainable innovation?