Digitization is currently surrounded by a spate of buzzwords and these are often used in a way that is almost inflationary. There’s no doubt that the intelligent, automated handling of large volumes of data offers countless applications to the domain of asset management, in terms of cost savings, or improved results.
In view of the increasing automation of advisory services, special emphasis will be given to Robo-Advisors. In the standardized asset management business, serving retail and affluent clients, Robo-Advisors potentially achieve substantial efficiency gains. However in the real asset management business – a core strength of Swiss banks and asset managers - this approach falls short, and for many reasons.
Interaction creates trust
Classic asset management for very wealthy clients is, and remains, a consultancy business, one based on mutual trust. On the inter-personal level, that trust emerges over time, and only through interaction and dialogue. Due to a series of developments over recent years, this element of asset management has fallen short. For example, the number of customers serviced per advisor was stepped up due to increased cost pressures, whilst administrative expenses increased significantly as a result of stricter regulatory requirements.
As a substitute for client interaction, digitization would therefore be rather counterproductive, and potentially detrimental to business development. Instead, it should be used to give the advisor more time for clients, allowing him or her to offer better advisory outcomes. The really useful applications of digitization are therefore more likely to happen in the back office, than in the client-facing part of the value chain.
Robot with weaknesses
For big customers with complex needs, the Robo-Advisor, in any case, is not enough. For example, there is a limit to the extent to which automated solutions can reproduce various illiquid or alternative investment opportunities (for example in the private equity setting). This is simply because insufficient data points are available to feed a working mathematical model or machine learning. Not to mention the psychological component that the advisor has to offer in times of crisis.
In forecasting and data processing (big data), artificial intelligence has the potential to directly generate extra returns or cost advantages. Digitization must therefore be deployed to improve the quality of advice, and wherever possible, increase the interaction between client and advisor.
Real competence is sought
Client advisors don’t have to be IT specialists in the age of digitization. However, they do have to be able to use the newly-acquired information and tools in a meaningful way if they are to provide their clients with better, more individualized, advice. At senior management level, on the other hand, more and more genuine digitization skills are needed. Among other things, executives in these positions have to address which processes can be improved by digitization in such a way that efficiency increases, that client advisors have more time for their clients, and that clients ultimately enjoy a better advisory experience - and outcomes.
Executive search firms specializing in filling key industry positions, amongst others, are finding that their clients have for the most part recognized the signs of the times. As a rule, management positions at larger asset managers and private banks are only reached by those who have a practical track record, or training, in digitization.
Understand the transformation
This development is also placing new demands on the executive search industry. The days when banks sought to hit their growth targets by recruiting seasoned client relationship managers are definitely over. Success or failure is decided far more on the strategic, than on the operational, level.
Management has to understand the challenges of digitization, and make appropriate adjustments to the offer or business model, and the value chain. Leaders who can understand and implement this transformation have to be identified, and brought into management. This is where a credible, serious executive search organization has to be able to offer its customers a helping hand.
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