Asset management firms have some catching up to do – research continues to show an industry that lags behind the rest of the financial services sector when it comes to using data and analytics technologies. One recent study from the Economist Intelligence Unit found that just 13 per cent of asset managers believe they can capture the full value of all the data they now hold.
That’s unfortunate. Data presents all sorts of opportunities for asset managers that are able to use analytics tools to extract valuable insight from the information they hold – not least the potential to make smarter investment decisions. And for fund marketers in particular, these technologies will prove crucial in the years to come – their counterparts in industries such as retail have already made huge gains using analytics tools, and asset managers must now follow.
Where, though, to begin? Well, one sensible strategy is to make a virtue out of necessity. The ever-increasing volumes of compliance regulation with which asset managers have been burdened in recent years, particularly around the know-your-customer (KYC) and anti-money laundering (AML) regimes, has required firms to build new structures capable of collecting more and more information from customers. Changing tax regulation, aimed at preventing tax avoidance and evasion, has had similar effects. Now it is time to begin extracting value from these structures.
Indeed, the data that asset managers are now required to collect from customers, if managed effectively and appropriately, can be the key to delivering much more targeted products and services to individual clients. Having provided so much data, investors will naturally expect asset managers to respond accordingly with the right offer – those managers that exploit the insights in their data may even be able to anticipate investors’ needs in advance.
Effective data management and analytics tools will transform asset managers’ ability to convert compliance responsibilities into growth opportunities in the years ahead. While asset managers may regard the increasing demands of regulators and tax authorities as a burden, their challenge now is to turn this burden to their advantage.
To do so will require investment in new tools that manage the flow of data through the organisation, automating collection, management and analysis. But those investments are already being made – for example, one recent PwC survey found that 66 per cent of tax departments are preparing to move towards automated workflows and document management so that they are able to generate better data aggregation and analysis.
Fund marketers should be excited by what is possible. But for tax and compliance departments, these ideas are alluring too. They represent an opportunity for these firms to move out of the back office and play a leading role in revenue generation and client acquisition. As they monetise the data they hold – or at least collaborate with other functions within the business to do so – their profile within the business will rise.
Not that this is to suggest these are easy tasks to accomplish. Clearly, the data strategies of tax and compliance functions will need to take into account evolving regulation in this function too. In particular, the European Union’s General Data Protection Regulation (GDPR), due to come into effect in May 2018, will impose strict new rules on all organisations that hold personal data. Asset managers will need to respond accordingly.
There will also be technical considerations to get right. Asset managers will need to ensure they are capable of collecting and storing data efficiently and securely, even where legacy systems and functional silos often make it difficult to create “one version of the truth”, and where different jurisdictions require different data or different formats.
This may be all the more challenging as technologies evolve. For example, clients and regulators will increasingly expect asset managers to capture insight from unstructured data – phone calls and face-to-face meetings, say – as well as traditional data. Social media will be another challenge.
Nevertheless, the potential for asset managers to extract value from their tax and compliance functions is enormous. And since the regulation already requires them to make significant investments and improvements in these areas – to collect ever more customer data that can be easily accessed, shared and analysed – it would be doubly foolish to overlook this potential. If you’re in fund marketing, tax and compliance should be your new best friends.
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