Recently, Amazon, Berkshire Hathaway and JPMorgan Chase announced their plan to join together to create a new company which provides less expensive healthcare to their employees. A day later, stock prices across the health sector fell. It’s no wonder Amazon and other tech giants have been blowing down entire industries and reinventing them—true champions of transformation.
The financial services industry—including asset managers—has had an interesting relationship with Silicon Valley. Companies like Amazon, Google and Venmo have launched technologies and enhancements that have been important enablers. However, the reality is that these same firms are positioned to be formidable competitors. By design they are disruptive, innovative and highly-tuned to the customer experience.
Asset managers should not assume that these tech giants will look past this industry. As the benefits of digitization start to take hold, Silicon Valley will come calling. This is just what Alibaba, an Amazon-like tech firm in China, did when it entered the mutual fund business in that market.
Asset managers should start to prepare for what is likely to be inevitable disruption. Staying competitive will mean taking a page from Silicon Valley leaders themselves in three key areas. Here’s how to get started:
1. Embrace ecosystems—and engage clients. Tech firms are masters of creating ecosystems that become part of the fabric of individuals’ lives. Asset managers can, and should, make this a priority too in light of this new competitive threat and changing investor dynamics. While digitalization in the sector is off to a good start, one of the keys moving forward will be to integrate offerings across a digital platform to complement other services. In addition, asset managers should ensure that they develop ecosystems in which all personal devices—tablets, wearables, virtual personal assistants and smart devices—become connected.
2. Capture new markets—in new ways. Silicon Valley leaders have done well when it comes to building a global footprint. Competing with them will ultimately mean that asset mangers need to become global enterprises as well. This obviously is a massive undertaking, and it’s one that can’t be successful without new approaches. Traditionally, asset managers have grown globally with brick-and-mortar offices that sell funds, deliver investor support and instill trust. But this form of growth is challenging to scale, and culture often suffers. Success in new markets will hinge on the ability to leverage technology to scale across multiple time zones and languages.
3. Excel at data—not active versus passive debates. Data is truly the “currency” of the digital age, and Silicon Valley knows this better than anyone. That’s why asset managers should improve their ability to acquire and analyze traditional and alternative datasets. One of the ways to do this is by staying ahead of the artificial intelligence (AI) curve. They should consider prioritizing investments in analytical and computing capabilities to support emerging technologies like AI.
Technology is advancing at a lightning-fast pace, and falling behind now may leave asset managers perpetually lagging. Time spent now getting prepared should pay off in the long run.
For more information about this topic, please read our recent InsideOps article, Silicon Valley: A Friend or Foe to Asset Management? or contact me at firstname.lastname@example.org.