2018 has marked a turning point in all industries, including investment management. The rise of new technologies and enforcement of more restrictive regulations put investment services providers to the test.
As of 2017, the investment management sector has seen a rise in passively managed funds’ investments such as ETFs compared to holdings in actively managed funds, experts suggest. This in conjunction with other low-cost options and the emergence of cutting-edge technologies continues to tighten the string around the neck of high-net-worth wealth management companies that are still using traditional business models.
Socio-economists link this paradigm shift in investment models to the generation following baby boomers, millennials, who seem to take the labour market by storm, currently represent around 50% of the working force. A tech-savvy, innovative generation by definition, millennials have also penetrated the financial industry, coining not only a new buzzword like “fintech” but generating a trend of widespread technology adoption with an unprecedented impact on business and investment management.
The investment landscape is changing and this brings about both challenges and opportunities. Experts have identified the following 3 biggest challenges in investment management that put fund and wealth managers to the test.
1. The rise of algorithmic trading and automated process management
The most obvious trend setting a new pace for wealth and investment management is the shift to algorithmic trading and automated process management, such as know-your-client, onboarding, compliance, or reporting, which thanks to technological advances, are a lot simplified and require fewer resources, on the one hand.
On the other hand, as investment strategies are charged by new quantitative means that use artificial intelligence and machine learning, it’s getting harder and harder for more traditional investment management firms to stay in trend.
Not all is lost though. Solutions like Tradesocio’s trading and investment management suite encompassing algo-trading and separately managed accounts (SMA) into one comprehensive investment vault can help financial organisations keep up the pace with the latest developments while expanding their product offering. The platform also has the capability to connect all algo-trading strategies with MT4, MT5 and other terminals, allowing investors to view the performance of a specific strategy or fund in real time.
Furthermore, by offering investors a complete overview of and access to a wide range of funds and investment vehicles to choose from alongside real-time reporting tools, the SMA and algo-trading solution put forward by Tradesocio allows investment companies that choose to implement it to remain fully transparent and maximise the lifetime value of their clients.
Automated process management is another area where traditional investment companies fall short. Investing a lot of time and resources in back-office and sophisticated client onboarding systems hinders the investment process and keeps investment managers away from what they do best: manage and monitor investments. More often than not, they need to use different dedicated platforms for each process.
By comparison, a complete turnkey and customisable solution like Tradesocio's investment management platform with built-in back-office and reporting modules offers a one-size-fits-all tool to wealth managers and brokerage firms, which helps them streamline their processes through automation.
2. Digitalisation giving rise to new customer segments
The technological revolution brought about by digitalisation had a massive impact on customer experience. In an ongoing effort to increase customer loyalty and attract new clients to their platforms, investment companies have turned to digital solutions. Very many of them have managed to attract and retain a massive number of younger investors particularly because of the plethora of digital investment tools and automated trading like robo-advisory, mirror trading and copy trading solutions, which practically allow them to enjoy the benefits of trading without sitting in front of the charts.
Numerous investment firms have made a bold step into the future and adopted digital solutions to meet the demands of the fast-growing community of digital investors. This is exactly where Tradesocio comes into play with its multi-pronged platform which facilitates a wide spectrum of investment options in both active and passive funds, offering investors the freedom of choice within a fully transparent ecosystem.
3. Stricter legislation requirements
To put some order and clarity in the financial investment sector, regulatory authorities have come up with stricter regulations and new rules that demand investment companies and especially brokers to disclose the number of their successful investors or traders, as well as add detailed risk disclaimers to any published material about their offering. While this lulled a lot of the brokerage noise in the media, it also meant the death of tinier B2C investment companies who were only just making their first steps into the financial space.
So, is playing by the rules so hard? No, it’s not if you know how to play your card right. Throwing a lifebuoy into the restless waters of financial investment, fintech solutions like Tradersocio’s TS Trading and ETF Station come with a revolutionary value proposition for investment management companies and brokerages, allowing them to expand their customer base and product offering by combining ETFs with actively managed funds, forex, cryptocurrency trading options and more. To complete the picture and answer the question of transparency, the platform allows investors to view the performance of the fund they wish to invest in, thereby empowering them to make well-informed investment decisions.
As transparency remains at the core of financial legislation, technology companies continue to innovate and build their offering around this prerequisite, while investors’ needs and goals become more demanding. In order to stay afloat, investment firms and brokerages need to keep pace and tune in to the market demands by refining their offering and going digital.
Adoption of revolutionary solutions similar to those proposed by Tradesocio helps financial institutions adapt to the new, digital investing trend and open their door to the affluent group of millennial investors.