Global Trustee and Fiduciary Services News and Views Issue 50

Prime, Futures and Securities Services | Financial Innovation 54 Although the uptake of fintech and collaboration with fintech firms by asset management firms hasn’t been at the same level as by other firms in the financial services industry (such as payment services firms and investment banks), asset management firms are currently using new technological developments to great effect. Both artificial intelligence and distributed ledger technology (DLT) in particular are helping asset management firms remain efficient and profitable in an increasingly digitised world. In this article, we have outlined some of the avenues of fintech still open for asset management firms, whether as an expansion of technology that has already been implemented or by adopting methods successfully being used by other financial services firms. Asset management firms and fintech adoption While there are certainly areas in which asset management leads the way for fintech, a PwC fintech survey of 2016 noted that 34% of asset and wealth managers had no engagement whatsoever with fintech firms. 1 The same survey found that, despite 60% of asset and wealth managers being concerned that some part of their business would be at risk from fintech in the near future, only 45% were aiming to put fintech at the heart of their strategy going forward. A report by Societe Generale in its Tech Magazine 2017 notes three major trends that could change current business environments in a dramatic enough way to endanger modern asset management: client unhappiness, demographic and societal shift, and technological change. 2 FINTECH IN THE ASSET MANAGEMENT WORLD Financial technology, better known as fintech, can be broadly understood as any technological innovation found in the financial services industry. While most commonly associated with modern startups and disruptive new technologies such as cryptocurrency and blockchain, many of the largest banks and other financial institutions are developing their own fintech initiatives with the aim of increasing transparency, lowering costs and improving security. All three could conceivably be applied to asset management firms. The younger generation of investors want a new style of asset management compared to that of their parents and increases in computing power and the potential of AI make delegating asset management tasks to technology a far easier proposition than it was a decade ago. Fintech in market research and analysis One of the most successful ways that asset management firms have adapted to the rise of fintech is in utilising AI and “cognitive software platforms” to undertake the market research and the analysis so often required in the asset management industry. While it may be claimed that a human element is required to fully understand the exact nature of any market, it’s an indisputable fact that there’s simply too vast a volume of relevant information and data for humans to process alone. A Thompson Reuters report on AI in the asset management sphere estimates that more data was created in 2017 than in the last 5,000 years combined. 3 AI programmes can quickly churn through the large data sets comprising ongoing trades, pricing other transactional information like big data, and highlight important events and triggers, allowing human analysts to then turn this into information that can be acted on. These programmes are able to take large batches of both sorted and unsorted data and scan the material to provide asset managers with predictions, recommendations and more personalised information to assist the human managers. The utility of this analysis can’t be underestimated: 80% of