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The asset and wealth management (AWM) sector is evolving rapidly. New asset management trends come and go, but you should monitor at least some lasing tendencies to stay ahead of the game.
To make things easier, we collected the most remarkable trends that will shape the future of the asset management industry. These valuable insights will allow global asset managers to reconsider their strategies and facilitate the design-making process.
So let’s discuss what lies ahead of the asset and wealth management (AWM) domain and how businesses can prepare for future changes.
For starters, we should mention the large-scale AWM transformation, which was a reaction to rising inflation and increasing interest rates, the impending global economic recession, and the crisis in the digital assets market.
The most notable asset management trends we will discuss further were formed to help AWM firms stay afloat and efficiently address the most common challenges faced by the fintech services industry.
The crypto collapse that took place in 2022 has shaken confidence in digital assets. Until this trust is restored, they will not be able to reach their full potential and provide value to businesses.
Hence, restoring this trust can become a competitive advantage for some players in the asset management industry. Undoubtedly, the enhanced regulations will help them with this task, but asset managers still need to take all necessary measures to understand and manage potential risks.
Thus, It will take asset managers to introduce advanced practices covering transparency, security, governance, and controls and reconsider the adequacy of their risk management controls and procedures.
Besides, both crypto native and traditional companies should consider conducting an independent audit that will facilitate the confirmation of digital assets and liquidity.
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Asset managers are responsible for keeping their client’s financial records, digital assets and account information private and secure. Given the increasing number of cyber-attacks and data breaches, asset management firms should be extra thoughtful when building cybersecurity strategies.
Thus, all processes, practices, and policies should be regularly assessed for weaknesses and appropriately enhanced to offer better control over cyber threats.
Another proven way to safeguard sensitive information and prevent lost or stolen credentials is to set two-factor authentication. For example, apart from username and password, clients of asset management firms may require a certain code sent to their smartphone or email to access their accounts.
Additionally, we do not recommend neglecting firewalls since they can be seen as the first line of defense against common cyber threats and allows keeping viruses and malware out of the network.
Finally, better encryption and wallet security measures should be implemented to protect cryptocurrencies and cloud-based wealth management platforms.
To increase the efficiency of asset and wealth management and improve customer satisfaction, asset managers rely more and more on digital technologies. In particular, this applies to implementing artificial intelligence and cloud adoption.
The picture below illustrates the major benefits the AWM industry can derive from AI implementation:
First off, the utilization of AI-powered algorithms increases the accuracy of asset and wealth management. As a result, businesses with complex portfolios can easily track their funds’’ current location and status.
Additionally, artificial intelligence helps automate mundane processes, for example, report generation, and simplifies data analysis.
Finally, the adoption of artificial intelligence allows for improving risk management, facilitates seamless portfolio construction, ensures easy compliance management, and helps generate more leads.
When it comes to cloud adoption, it facilitates data management by offering advanced security of sensitive information, seamless data sharing, and the ability to get valuable insights from the data quickly and efficiently.
The major benefits listed above make digital transformation an absolute must for the asset management industry.
Today businesses feel anxious about the security of their funding and want to know how their money is performing. Consequently, they become more demanding when it comes to the quality and quantity of information they get from asset managers.
This challenge forces AWM firms to establish a transparent reporting system that will allow them to provide clarity on businesses’ entire financial asset database and help asset managers make more informed decisions.
There are several types of asset and wealth management reports digital asset service providers should offer to their clients:
By receiving these transparent reports, businesses will feel confident that they are not deceived, and that no crucial information is hidden from them. Furthermore, by getting transparent reports, they will be able to maximize the efficiency of their asset management activities.
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By making ESG frameworks an essential part of the investment process, asset managers can uncover hidden opportunities for value creation and differentiation. However, some of them may find it difficult to wade through emerging practices and evolving regulations.
Thus, efficient approaches are not limited to risk management and compliance. Truly working strategies are those that fit in the investment style and the culture of asset managers.
To integrate the ESG principles efficiently, wealth managers should be able to provide answers to the following questions:
Clear answers to these questions will facilitate the smooth and painless implementation and execution of robust ESG frameworks.
Regulatory compliance is indispensable for the asset and wealth management sector since it ensures that all funds are managed in accordance with certain rules and regulations.
Here we should discuss two types of compliance: internal and external.
Internal compliance implies following regulations, procedures, and policies established by the company management.
At the same time, external compliance means adhering to the laws and regulations provided by the government and authorities.
The lack of compliance with these rules is fraught with huge fines and damage to the brand’s reputation.
The picture below showcases the common challenges asset and wealth managers may face trying to achieve external and internal compliance.
To overcome these challenges, organizations should constantly keep their internal policies updated, make security of the sensitive information their top priority, and establish consistent documentation and baseline processes.
There are several factors that make asset managers feel persistent pressure on fees. The first one is a shift towards passive low-cost investing funds. The rising interest in “cheaper” investment options makes asset managers cut fees to retain their investors. Here we should mention that these cuts can be both temporary and permanent.
Another factor influencing fee compression is fierce competition in the wealth management domain. Asset managers are forced to lower fees to gain new investors and retain the existing ones and, thus, remain competitive.
Apart from that, digital transformation and adoption of the latest technologies, namely Artificial intelligence, Blockchain, and Machine Learning, has affected investment fees. Their implementation resulted in increased productivity and efficiency and lower operational costs. As a result, asset managers get the chance to offer reduced fees.
Finally, let’s not forget about the increased transparency regarding fees and operational practices, which made it possible for investors to find out what they are paying wealth managers for. It also resulted in fee compression in the wealth management sector.
Now that you know the latest asset management trends that will have the biggest impact on the AWM industry, you can better adapt your business to evolving conditions and navigate through uncertain times.
If you came up with some innovative ideas in asset management and need help with their implementation, feel free to contact us. OpenGeeksLab has built multiple software solutions for the fintech industry and will eagerly take on your project.
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