The Thought Leader's Voice: Podcasts

The Future of Asset Management: Key Trends and Insights

16 December, 2021

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This podcast was originally aired on 16 December, 2021

James Redgrave

The Future of Asset Management: Key Trends and Insights

 

As part of our Thought Leader’s Voice podcast series, we are thrilled to be in conversation with James Redgrave on ‘The Future of Asset Management: Key Trends and Insights'.

In the Thought Leader’s Voice podcast series, we explore the world of how independent thought leaders bring their ideas to scale within the business world and share powerful, thought-provoking insights with our listeners.

Our objective from this podcast series remains to educate senior-level marketers, business and thought leaders to help them solve some of the most pressing questions today and in the future.

This is an independent and self-sponsored series aimed towards enhancing the profiles and importance of thought leaders.

We are thrilled to be joined by asset management expert, financial journalist, and researcher, James Redgrave, Head of EMEA Insights at State Street.

With over 15 years of journalistic and content creation experience across respected titles and financial services firms, James has seen the growing importance of insight, thought leadership, and quality content in the financial services industry, particularly in the drive for sustainability across the asset management sector.

James has degrees in History & Politics and Journalism. He has extensive experience providing distribution-focused research and market intelligence consultancy services to Europe’s largest institutional asset managers. As a journalist, he has worked with specialist financial publishers, including the Financial Times, covering institutional investment and retail financial services.

James regularly speaks at industry conferences on the evolution of the asset management industry and sustainability in the sector.

Join the conversation for an inside view of the challenges and opportunities in asset management marketing and communications.

Key Takeaways

  • The asset management industry has faced a tumultuous and unprecedented time since the fallout from the Covid-19 pandemic, challenging the global regulatory environment, and changing demands from investors. Asset managers are required to not only make good portfolio investment decisions but also help navigate their businesses through challenges. How are asset managers adapting to these challenges?
  • The asset management industry has seen an increasing role of thought leadership and content, not only to connect internally and externally but also to inform and drive action. How is the role of marketing and content evolving within the asset management sector?
  • Most global asset managers seem to continue to accelerate the investment in data scientist teams, data analysts and technology, especially in the last 3 years. Has a comprehensive data strategy become paramount for asset managers? How is this process being managed?
  • How are asset managers adapting to help broader financial institutions to provide more personalised, unified customer journeys and in doing so, maintaining a competitive edge?
  • A fundamental priority for asset managers and all financial services companies is ESG and they are using several sustainability partners to drive this. How are these unique partnerships evolving in the industry? What other kind of partnerships are asset managers likely to look for in the future?
  • What are the challenges faced by asset managers when it comes to ESG reporting standards? Is there a need for support and a top-down push in this space to create a more level playing field?

Full Transcript of Podcast with James Redgrave

Rachael Kinsella: Hello and welcome to The Thought Leader’s Voice. I'm Rachael Kinsella, Editor at iResearch Services, and your host today. We're thrilled to be joined for this episode by James Redgrave, Head of EMEA insights at State Street, to discuss 'The Future of Asset Management: Key trends and insights'. With over 15 years of journalistic and content creation experience across respected titles and financial services firms, James has seen the rising importance of insight, thought leadership and quality content in the financial services industry, particularly in the drive for sustainability across the asset management sector. James has degrees in History and Politics and Journalism, a great foundation for honing a nose for a compelling story and genuine insight. He speaks regularly on the evolution of the asset management industry and indeed sustainability in the sector. A very warm welcome to you today, James, thank you for being here during COP26, an important time for us all, especially for financial services.

James Redgrave: Indeed and thank you very much for having me.

Rachael Kinsella: Great to have you here. If we just dive straight into the first question. Thinking about the asset management industry, it's faced turbulent times for some years now, not just feeling the fallout from the COVID-19 pandemic, but the challenging global regulatory environment, which has been evolving over the past 10 years and indeed changing demands from investors. Asset managers will not only have to make some portfolio investment decisions, but also help navigate their businesses through these multiple challenges. And the opportunities that come with them. How are you finding that asset managers are adapting?

James Redgrave: Yeah, that's a good question. And I think you're right. Last year obviously made a very big sort of impactful difference to how asset managers and indeed firms across various industries had to work in terms of obviously moves to remote working. The biggest sort of in the moment challenge, obviously from a portfolio management perspective was liquidity and the inevitable sort of consequences of a large market sell off. But I think it's also important to note that what happened last year to a certain extent kind of honed in on or accelerated changes, which were, were already underway. So, we conducted a piece of research sort of towards the end of last year in which we asked asset managers who'd come out of the initial fallout from the crisis, but we're still sort of very much in remote working and block down scenarios. I mean their various countries around the world, not just what the biggest challenges they faced, you know, in the moment were, but what's changed for them in the long-term, what they will be doing more of as a result of their experiences of the crisis.

And I think a couple of interesting things came through. Firstly, the biggest challenges that they faced were distributing sort of effective technology to staff, which is perhaps not surprising given the situation, but also, in sharing information and knowledge, both internally among staff and externally with clients and that, I think it was an interesting thing to be told because I mean, we're obviously very used to extremely remote forms of working, anyway. Email has been an absolute mainstay of communication for more than 20 years now, most, or certainly a large number of asset managers will have more than one office frequently in different countries or even different continents. So, it was interesting to have hit home just how much that loss of the ability to talk face to face with the people who are sort of directly sat around you or in the same office as you was seen and perceived to be a sort of major challenge. And moving into the long term, what has happened as a result of these experiences is I think the acceleration of, as I say, trends, which were already going on. Remote working is now been incorporated into the asset management model. Last year one of the questions we asked was to what extent do you expect all or most of your staff to work from home all or most of the time for an indefinite period going into the future nearly just under 60% said that they did expect that to be the case. We asked it again this year with data, which has literally just come back this week. So we're still kind of digesting, but that was up to about 65%, two-thirds. That's not going anywhere, but that brings a lot of challenges to asset managers around regulation, specifically cyber security. So asset managers are telling us very much that they expect the increase in terms of compliance, increased cost, increased time, spend on cyber security issues. More than half say that they're going to actually invest in cybersecurity technology for homeworking staff - VPNs and things like that. More than half think that that they're going to have to do much more monitoring of communications, email, internet use, and things like that. So that's, I think the major challenge that's come out of the crisis that they're telling us about.

Rachael Kinsella: Right? Yeah, it's a massive shift, isn't it? In terms of working models across asset management and indeed across financial services as a whole that have such a high percentage that are going to be permanent homeworking, then investment is going to have to go into that infrastructure, the cyber security measures, compliance. There's so many extra layers to think about on top of the already big regulatory agenda, the big, all the compliance goals that asset managers already face and have done for a number of years. So, it'll be interesting to see how, how that's going to evolve, whether there'll be particular people in roles responsible for looking after cybersecurity, people coming in for that project management role around the infrastructure and making sure that the right communications and tech are in place. Is that something that you've seen through your research as well?

James Redgrave: Certainly. And it's still fairly early days, of course, because I think they're still looking at what good looks like. And more importantly, or at least as importantly, regulators are still looking at what they want asset managers to be able to demonstrate in this space. From a regulator's perspective, there is a huge difference between a network of computers clustered in a series of offices around the country or a continental or whatever that jurisdiction is, all containing sort of, we'll all be talking to one another, all on a joint system and all containing potentially sort of sensitive information for clients and market structural stuff, diffuse that network of computers around hundreds or thousands of homes across the country or a continent. And it becomes a much, much more complicated sort of area. So certainly, what we're hearing from managers is that certainly investing in beefing up the security of people's home WiFI networks and computers, if they're going to be sort of also plugged into the company's systems is essential and communication is also important. So, a lot more effort is now going into discussing cybersecurity training, talking about cybersecurity in this new sort of work from home, remote working sort of environment with staff and making sure that they understand additional risks that might take place, but as ever, they also have to wait on communication from the regulators in terms of what they might need to do as well.

Rachael Kinsella: Absolutely. And as ever, internal communications become critical in this, as you say that educational process about cybersecurity risks, the need for compliance and numerous different areas, but also keeping in regular touch with, with colleagues across the globe, as well as clients to make sure that they have what they need and that they're informed with all the latest goings on. So, I think we are seeing that internal communications piece becoming increasingly important and, and efforts being made to, to beef up those programs internally in terms of communication, training, education, and regular monitoring of, of systems and how they're used. Also, collaboration of course, particularly when looking at different systems and different workflows - elements like that. And I suppose that leads nicely on to external marketing communications and marketing challenges and opportunities in the current and future environments. Obviously a key way to differentiate is through marketing communications through the brand, through creating educational content for external purposes and also embracing digital marketing technology and techniques. One of the key trends that we're seeing is a role of head of content or editorial, content directors appearing more regularly within asset management firms. And that's really showcasing the increasing role of thought leadership to connect again internally and externally, but also to inform and to drive action. How are you seeing that role evolve, of marketing broadly and that focus on content within the asset management sector?

James Redgrave: Yeah, I think it is certainly at the moment and or these days, very much a technology question. I think in terms of the importance of having a sort of content function and being able to talk to your clients outside of the sort of narrow areas of what you sell, or what services you provide, it's kind of a battle, that's already been won. I think you'd struggle to find a sort of significantly large asset manager or sort of non-very sort of niche asset manager who's not already particularly well-known for one particular thing, who doesn't have some kind of content function. Where I think it is evolving is as you say very much on the digital and distribution and the types of products that these areas of marketing put out. So again, we talked about how that the recent crisis acted as an accelerant for ongoing trends, I think we saw that here as well prior to the crisis.

I think there was already a recognition that recorded, so podcasts sort of things like this, and webcasts and generally things that can be done on a remote basis were useful, valuable, and increasingly used methods for distributing this kind of information. And there was definitely a shift going from publishing a white paper or whatever it might be to more digitally distributable recorded type things. The other area I think is that obviously there's always been a tradition of getting half a dozen of your clients into a board room, sitting around the table, having a conversation and then producing a sort of paper or something off the back of that, or getting some of your senior executives into a room, getting a company to film them, producing a sort of video. And that's obviously one way of doing this kind of conversational educational piece. And the other way of doing that would have been to have those people come in remotely and do it much the way that we're speaking now.

I think there were, long pre-COVID, they were already pressures on the earlier model. It's difficult to get several people potentially from out separate countries, sort of all into one office at one time, especially if there are clients involved. There are cost pressures on the extent to which companies want their, their executives flying around and for what reasons, ESG reasons for that as well, of course, as well, and people monitoring the amount of them flying and travel that they do. And that the whole process is just a longer, more cumbersome, and more costly way of doing it. However, it was a way of doing it. All the sort of established vendor relations were in place for that kind of thing. And it was something that people knew how to do and knew worked. So, I think that there was still a kind of lag on shifting over to doing it via some kind of piece of online technology like this. So COVID obviously made a necessity of that particular virtue. And I think we will see now a much more pronounced shift towards tactile, agile methods of recording conversational thought leadership style marketing from the more legacy physical in-person event ones.

Rachael Kinsella: Yeah, I think that was one of the good things to have come out of this, this growth, is the drive to digital in a positive way, as you say, it's accelerated a trend that was already developing, moving more onto webinars and podcasts and video content, making that more digestible than snackable. And also, I think having on - demand content has really come into its own through the pandemic. One of the pressures that you mentioned was getting the same people in the same room at the right time. That was always a challenge for organizing those kinds of events and discussions, and also the scope of other events and other activities and diaries booking up with whether the big policy events, for example, or other high-profile conferences that were going on either in person or virtually. So being able to carve out a niche or garner attention in that space was always, always a challenge. Whereas through the pandemic, people have been hungry for online content and more predisposed to engaging with it and either signing up and joining on the day or downloading it and taking it all in afterwards.

James Redgrave: Yeah. I mean, definitely in terms of our research, client experience and client or customer facing technology and platforms is, is a big priority for sort of increased internal investment. And that is a consequence I think, largely of, of being forced to do more things remotely. I mean, it's important, obviously not to overstate the movements of these trends. I don't think that the face-to-face meeting is going to disappear. I don't think that that the conference, the sort of physical event is going to disappear either, but I do think that a lot of things that would have been done in person, especially sort of smaller things involving small numbers, maybe one or two or half a dozen or so people, will migrate to a more remote sort of model.

Rachael Kinsella: Yeah, I mean, we're already seeing some face-to-face conferences, in-person events going on in various jurisdictions at the moment and whether, whether they will continue, whether there'll be other lockdowns, we don't know at this stage, but I think that they're not going anywhere, but I think it has opened up new ways of communicating and engaging with, with clients and, and being able to drive the educational content and the thought leadership in different ways. So hopefully that will be a trend that will continue and will become more sophisticated as well, as firms, as you say, invest in different platforms and technologies where they can really make the most of that kind of content.

James Redgrave: Yes, definitely. I mean, I think the, the better software gets at not cutting out recording clearly. It goes back to the question we were initially asking about what the challenges are in terms of getting physical tech to people. That's going to involve things like quality microphones, maybe better laptops, or that may be subsidizing home Wi-Fi so making sure that that bandwidths are good enough and also physical appearance of it, if you want to convert a podcast into a video, as things stand, the kind of automated backdrops are not, not great. You don't want everybody having a different real backdrop, but as technology improves, no doubt, there will be more seamless virtual backdrops and things like that. And you'll be able to get out visual things, cutting to slides without problems and things like that. So, I've no doubt that the technology will, will foster better outcomes there.

Rachael Kinsella: Yes, absolutely. And of course, all of this, there's no use to anybody without good quality data. That's well-managed and well distributed to well, well kept in a compliant fashion. Obviously, that's absolutely crucial to an effective distribution and sales strategy. Global asset managers seem to be continuing a trend in accelerating investment in data scientists teams, data analysts, and technology in that space. Something that we've seen particularly over the last three years. And that is again, that seems to have accelerated during the pandemic with one eye on the rigorous global data compliance requirements. Do you believe a comprehensive data strategy has become paramount for asset managers? And how are you seeing this process being managed?

James Redgrave: Yeah, so, I mean, for four or five years now, I've been surveying asset managers on the question of their use of data and the relationship between their internal technology, their third-party relationships with either technology or data providers and, and the data itself. And the typically similar answers come back year on year, really, which is improving their effective use of data is pretty much the most important thing to, to any asset manager. And it doesn't matter where across their organization, front middle or back-office investment performance or compliance with regulation or, or whatever it might be. They have very significant challenges, which have, I think, been improving over the time I've been doing, or their ability to meet them has been improving over the time I've been doing this research, but that still remain, which is that what they want is a kind of technology-led fairly seamless data environment.

There are three sort of stages to this. There's your storage, there's your search. And there's your sharing, basically. They want to go from a situation where dozens and dozens of your large kind of global original asset manager, legacy systems, serving different areas of your business, potentially sort of different ones in different geographical areas, ones which have been married together after some M&A processes, which have been inherited from companies that they bought or merged with, etc. Right now, there has to be a loss of physical exchange of data between those systems. People have to go in and find what they want, put it in a format, give it to someone else. They have to put it into a different format for whatever they want to use it. If you generate some data, you know, from a trade or something like that, which you store in one way, and then your compliance team needs to share it with the regulator, it needs to get to the compliance team and then the regulator will have a sort of its own format for how to do it. And then there's the sort of the dream, which is pure unstructured Cloud-based sort of lake, if you like of, as I say, unstructured, but tagged data, which sufficiently good robotic and sort of AI type technologies can simply comb through, find the relevant tags and give to whoever needs it. And it should have access to it in their part of the business on an automated basis in the way they wanted. There's a, there's a big difference between how things have historically been done and how asset managers want them done. So all their investments in what you might call emerging technology, cloud, advanced analytics, using things like AI, etc, is basically done to try and homogenize the way in which everyone in their organization interacts with all the data that their organization produces.

And of course, they produce an awful lot of information, and the bigger they are, the more they produce. So it is a very, very difficult challenge, but it is, I would say in terms of their investment in technology, based on our research, priority number one, for their operating models and enhancement of their operating models, not just an investment in internal technology, but the choice of outsourcing partners and technology partners to work with. And then there's also the question of sort of broadening the number of data sources you use and the type of data you bring in. So again, looking at our 2020 research, one thing that we were told is that about two thirds of asset managers globally are planning to use more data from a wider variety of sources and different types of data than they have historically used. And approximately one third of them have the capacity right now to actually absorb all the data sources they want and integrate them into their existing systems. And they are predominantly looking at third parties to help them to patch those things together because they simply can't do it internally. So again, it comes back to this, this integration, not just of data, of integration of technology, basically sort of question.

Rachael Kinsella: That's a much bigger number than I was expecting, actually, very impressive that firms have got to that stage where their data, almost an overarching view across the different sources. You can see why that's challenged, number one, priority, number one, being able to embed technologies to make better use of data when it's coming from multiple sources. And indeed, as you say, creating vast volumes of data as asset managers do, it's quite impressive that, I mean, it's probably through those third-party relationships and through, through those partnerships, but also…

James Redgrave: Yeah, exactly. It's large numbers recognize the need to do this and both the internal integration piece and also the external kind of bringing more data in piece, but about the same number, about two thirds also acknowledged that they actually can't do it and that they need to find partners out in the industry, tech firms and the like to enable them to do it. So there's definitely recognition, but there's also significant problems with the actual implementation of, of their desires in terms of data.

Rachael Kinsella: Yes. Yes, of course, as you say, sort of matching up legacy systems, all the different sources of data, where there are gaps, where there are silos within the, within the business, as well as it being a massive challenge. It's also an opportunity to differentiate by, by having the right technology in place by, by having the more seamless systems and embedding of the different technologies within the organization.

James Redgrave: Yeah, exactly. It did. It's a differentiator in terms of it enables them to do their job better. The more effectively an asset manager uses data, the better investment outcomes, the better risk outcome, the better planning, communication, and information sharing outcomes it achieves for its clients. And I mean the fundamental differentiator, I think that any asset manager wants is to be better at managing assets than, than its peers.

Rachael Kinsella: Of course, yes. Anything that's going to help do that more efficiently, more effectively, give a more holistic view has got to be number one priority. And that also knit leads nicely on to client communications, client engagement and personalization. So, you know, similar technologies can be used for using data to effectively personalize different communications to be able to meet customer demands in a more responsive and unique way. How are you seeing asset managers adapting to help broader financial institutions provide these, these more personal unified customer journeys and in, so doing, maintaining a competitive edge?

James Redgrave: Yeah, I think when you look at the sort of the institutional customer base, it's useful to start with terms of its relationship with technology and specific fund-based sort of level of marketing to look at a trend in retail, which is that direct-to-consumer marketing is becoming more important to the asset management sector because it is now not just possible. It would actually be quite common for somebody to select a fund from an app on their phone, and if they have invested their money, put it in that and that person, and that person is going to select a particular fund that is valuable for an asset manager to have some kind of relationship with, or if not a relationship, at least be a recognizable brand to that person. Historically, this was much more intermediated. Your relationship would have been with an IFA or a banker or somebody who selected those funds on behalf of the individual.

So that is a very important component of the direction in which asset management or fund management marketing is going. How does that relate to the institutional side? It is related to another sort of significant trend of a much older and more longstanding trend, which is the shift from defined benefit to defined contribution in terms of the way pension funds and pension schemes are structured. So historically the DC market, which has in many, many developed pensions markets overtaken the DB market in terms of number of assets, or if not done, we'll do so sort of soon and is of course the only game in town for the emerging kind of pensions industries that are growing up in countries, which haven't historically had them, it's been quite institutional in the way it's appeared to the end user - the member joins a scheme, maybe they're auto enrolled like they are in the UK or Australia, or maybe they choose to do so.

And they go into a default fund and the default fund is a croissant institutional vehicle. A manager manages it; and a provider chooses it. The manager, the end user doesn't really have any kind of interaction with it. But a lot of pensions schemes defined benefit, defined contribution, sorry, pension schemes are open architecture or at least have some kind of fund platform involved in them. And as the number of assets in these schemes grow and the number of assets which individuals have grows, the more they will move towards treating it more like a kind of retail proposition, being aware of the funds on their DC platform, choosing funds, maybe creating strategies and things like that. So with that in mind, if you're an asset manager on a DC platform, historically you've either been part of the component of the default fund or you've had no money through that platform really, but in future, it will be a genuine means much like the, the apps and the sort of retail platforms that that I was just talking about before potentially, or getting money in, if the end user recognizes your fund and recognizes your brand in terms of how they support the actual pension provider.

I would say that I'm not aware of any particular examples of actual fund managers working with pension platform providers to, to provide communications or think support, but it is nevertheless very much a channel through which you need to be able to reach the end consumer because it's going to be a growing part of the kind of D2C market, basically.

Rachael Kinsella: So are you seeing one of the trends that we've seen in recent years is financial institutions working with FinTech providers or tech companies to, to create technologies such as apps or particular payments platforms and direct to consumer apps and technologies of that kind, are you seeing more firms doing this sort of thing in-house, or again, are they working with these third parties or, or other partners to be able to, to provide more, more apps and different types of services?

James Redgrave: Specifically on the kind of distribution or sales of funds to client, I would say that probably the preferred model is still, it's still pretty much to sort of buy into it, to sort of FinTechs or see, see what already exists. There are, I think some kind of in-house D2C sort of app-based propositions, but in terms of that kind of, you know, robo-advice, as it certainly used to be called I'm, I'm more aware of from my sort of knowledge of the market sort of investment in, in FinTech. It's not, I would have to say an area which I'm, I'm quite as close to as maybe some of some of these other areas. And it's not something that I've sort of directly addressed through the research recently.

Rachael Kinsella: Okay, great. And then another area of partnerships of course, is sustainability. And it's an area that we're, we're seeing evolving, I see another fundamental priority for asset managers and indeed all financial services companies is ESG, the race to embed ESG strategies within the firm, within the investment process, within client communications and then, you know, regulation on the, on the horizon. On putting particular measures in place for, for particular reporting standards and a number of different areas of development there. But in some recent research that we did at iResearch, we found that funds and investments were the front runners in sustainability initiatives. They actually rated themselves quite highly, as a sector, and were rated at the same level by, by their industry peers, 45% of the respondents outside of that sector, feel that funds and investments are offsetting the sustainability success trends, which is interesting that they are seen as the front runners, I think potentially from the growth in ESG investment opportunities and products and platforms and the way they've been reported over the past 10 years.

And again, that's something that's, that's accelerated in, in recent years for various reasons. And financial firms are, are working with other industry participants, such as trade bodies, policy makers to, to drive forward various different sustainability issues. And again, the asset management sector seems to be a front runner in that regard with a number of different commitments and that collaborations with think tanks, different policy makers, other organizations that can provide more, more sustainable products and services. Over 60% in our research are using several sustainability partners across the board. And then 28% are working with one partner on particular sustainability initiatives. With that in mind, we all need to work together. How are you seeing these unique partnerships start to evolve?

James Redgrave: Yeah, I mean, I think the ESG issue is one that asset managers have been taking increasingly seriously in, in recent years. And it's certainly moved from being a communications issue to a genuine, you know, operations and structure issue. For example, around 80% of the respondents to our most recent survey say that they have integrated ESG across their portfolios, not just their sort of ESG funds, but their mainstream portfolios to an either substantial or at least somewhat substantial extent. The problem is of course that what integration means in that context will differ by respondent and the real problem that I think asset managers have when it comes to complying with the ESG regulation and also doing what they want to do in terms of improving ESG modeling across their portfolios, is that there is a real difficulty in understanding what standards are and what they should be.

And the biggest issue we see is when it is the data - in and data - out question, if you like a lot of respondents to the most recent survey we did would say that the number of data sources they have access to and when it comes to providing them with, with the SG data on potential sort of securities for investment are inconsistent across the different sources that tend to be sort of backward looking and based on old data and not terribly up to date. And a lot of them are actually very unclear and obscure in terms of what they're actually saying. And there isn't a top-down push by governments, by legislators, by regulators to impose standardization on the providers of data in their space. And then on the data out sort of side as well in terms of how they comply with reporting regulations, what they tell clients and customers, what they tell regulators again, where we're told through our research that, that that's not always terribly clear to them either, and that they want a lot more actual sort of intervention in this market from, from regulators in terms of telling them what they should be doing.

So, yeah, there's two areas of this market. And again, they both come back to the data question that, that we've been talking about quite a lot, asset managers need more trustworthy and consistent data, and they need access to it, and they need better guidance on what they put out on the subject as well.

Rachael Kinsella: Absolutely. Yeah. There's a real need for consistency, continuity and clarity on reporting standards, on what is expected. I liked the way you positioned it as data in and data out. I think that's a very clever way of looking at it and a good model to follow where you're looking at, how you can evolve these different strategies and embed them within business models. Also plays out with what we saw in our research where 57% believe that governments need to do a better job of supporting the implementation of sustainability initiatives. And 42% suggest that policy makers must get involved to accelerate the necessary changes. So that we'll need for, for a top-down approach as you mentioned, to bring together some, some form of consistency and clarity of rules, it's going to be very interesting to see how these, these regulations develop and what what's going to come into play both on, on the reporting providers and the, and the access to data, but also what's reported in terms of financial results, client communications, and it spans all areas of the business. So, it, it must be very difficult for financial services firms to, to stop, to plan and embed these strategies without knowing what the benchmarks are going to be and, and what the particular regulatory requirements are going to be. So there needs to be a lot of communication on all fronts from all industry participants to, to make that happen and to, to create a more level playing field.

James Redgrave: Yeah, and I think you look at where there have been serious regulatory efforts in this area, the European union in particular, in European commission's rules on taxonomy and that kind of thing, they have been fairly sort of slow moving targeted to particular areas in this case, the EU, one wonders whether something like COP26, as you mentioned earlier, could lead to a more global framework being put in place, perhaps a slightly sort of faster moving one as well to enable asset managers to better serve their customers in this area.

Rachael Kinsella: Yeah, I think it would be a real driver of particular initiatives and in bringing different parties together. So, it'd be very interesting to keep a close eye on, on developments that, that come over the next week. Have you got any thoughts or research or response from asset managers recently about, about greenwashing? Because again, some of this comes from the lack of clarity in terms of reporting and regulation and different best practices and standards. Some of it is pure overenthusiasm that various different sustainability initiatives are being developed or in progress, but then not talking about the areas where actually more needs to be done or further progress needs to be made. Are you getting a sense of the direction of travel for, for firms and in that area at the moment?

James Redgrave: I think there's a sense, certainly from the respondents to our research, that it's something that really needs to be, and kind of goes back to the answer okay. Before sort of stamped out from the top down. So, 56% say that regulators should mandate specific sort of sadness in this area. And if they see greenwashing going on, people not sort of train things as things that they aren't, then that's really something that needs to be prohibited, the ability to sanction managers to do it. But again, if they don't know what adequate agreed means by the standards of, of legislation and regulation, it's very hard for them to, to comply there is this, I mean, so the corroborator 56 cent is that 44% said that regulators should let market develop their own rules around this. So that there's a genuine split in the industry as to how this is best handled, whether the industry pleases itself or is pleased, but there's a source of small, but significant majority in favor of, of this being forced rather than from the bottom up.

Rachael Kinsella: Yes. I mean, we've got a huge response in our research that greenwashing is definitely a problem for the industry across financial services, not just, just within asset management and investment and funds, but there are differing opinions on, on, on how it can be, be stamped out and and what level and amount of of regulation needs to be in place to, in order to do that. So it will be interesting to see if there are further developments or further clarity on that three in COP26 and various initiatives that come to light after the event. So be definitely one that we'll be talking about more and, and keeping a close eye on for the developments. It'd be interesting perhaps to speak again and say a month or so it's time to see what what's coming out of that and to see if the firm initiatives that have been put into, into place.

James Redgrave: Absolutely. Yeah, it'll be probably less the speeches and the things that happen over the next couple of days and more the things that get published and, and more sort of detailed, tangible changes that, that come out as a result of, of the sort of announced changes would have to be looked at in detail.

Rachael Kinsella: Yeah, absolutely. And that moved from beyond words into action and, and everyone working together to, to do so. So I think we talked about that there were multiple challenges, some of them lead to interesting opportunities, I've see data, technology, cybersecurity, being able to invest in the, in the right technologies, the right systems and processes and infrastructure across firms, ESG from portfolio and investment perspective, but also in terms of broader sustainability initiatives across asset management. Are there any other key drivers that you think are going to be trends to watch?

James Redgrave: I think we talked a little bit before about partnerships with, with other companies and syntax and things like that. One thing that I'm quite interested in doing is mapping the kind of relationship between asset management firms and the wider ecosystem, if you like, of other financial service and technology firms who can support them in their various endeavors. So for example, last year in the 2020 research, we looked into sort of outsourcing strategies and again, very much of the technology versus date of issue. And going back to what we were saying what I was saying, sorry, about how quite often the internal systems just aren't there, generally speaking the trend was not just for increased outsourcing in particular of data analytics type functions. So investment performance, risk analytics, and monitoring, but the two main areas for outsourcing. The other quite interesting trend, I think, was a kind of consolidation in the provider market for these outsourced services.

So there's been historically I think the tendency in the path of asset managers to find a specific sort of function that they want somebody to do potentially better than they can do it in house, finding someone to do it. Now, I think they want larger organizations who can take on multiple functions at once and have one relationship, which from a sort of risk monitoring piece supplier, understanding your, your suppliers sort of situation is obviously easier for them. So I think we are going to see increased outsourcing of areas relating to this kind of marriage of data and technology that we've been talking about. And I think we're going to see large technology firms or other providers getting the bulk of the new business in that area, as opposed to smaller FinTechs. Having said that obviously smaller FinTechs have the capacity to sort of innovate and they will bring new sort of things into the market that perhaps aren't preempted at the moment. So there's still, I think, potential for that trend to be challenged by new technology and new ways of doing things.

Rachael Kinsella: Yes, I suppose it's that balance of agility and speed to market versus security and lower risk of working with multiple providers or multiple partners. And then potentially we would see different initiatives or different business units set up for particular, either the FinTech aspect of it and working with particular partners. And then one more holistic partner is, as you say, across other areas like cyber security and compliance and, and looking after the, the different systems, that'd be interesting to see if there's those pockets of innovation for particular digital services. Yeah.

James Redgrave: Yes. Whether there's a kind of spring back to kind of multi-provider models or whether they is significant M&A in the established provider models of the sort of FinTechs and these things get sort of pulled under single rooms is I think without wanting to hazard a particular prediction about the direction of this market, it's definitely an area of trend to what.

Rachael Kinsella: Yes, absolutely. I mean, we're seeing FinTechs being bought by, by larger financial institutions, but we're seeing partnerships with, with Big Tech to bring together digital services, particularly on the retail side. So it'd be interesting if, if that trend continues, we're seeing increasing M&A across FinTech. So the part that the larger asset managers are going to play in that market's going to be interesting. So it's difficult to say at the moment what direction that's going to go in, but as you say, definitely wants to keep an eye on. Are there any further trends you think we should be watching out for, or areas that we need to be aware of?

James Redgrave: I think what we've covered off data and technology and how they relate to one another ESG regulation, particularly pertaining to sort of security and sort of post COVID operating models with remote working in there. They're the big ones for, in terms of what our research has shown

Rachael Kinsella: Brilliant. Absolutely. But it'd be very interesting to see how, how things play out and keep an eye on the, on the future of asset management. It's turbulent times, but also that there is a lot of opportunity there. So, it'd be interesting to see which firms are really getting out there and, and leading the way in terms of the ESG initiatives, in terms of their offering for the clients, both retail and institutional and working in partnership with other interesting firms, either on the technology side or providing greater security to clients. So it be definitely be interesting to see how that continues to evolve over the next year and beyond.

James Redgrave: Yeah, absolutely. It's certainly an area we're going to continue monitoring through our surveys and our research.

Rachael Kinsella: Excellent. Thank you so much, James. And thank you for bringing all the different elements of research to our conversation today. I think it's painted a really good picture of, of the current challenges and opportunities that the trends that we're seeing coming through in recent years and also the trends that we're looking at on the horizon. And I think in terms of widening our listeners, an understanding of the state of the market at the moment, I think it's been, been really educational and very useful indeed. So thank you very much for, for joining us. And hopefully we'll speak to you again with some more research and some more, some more facts as we go along.

James Redgrave: Absolutely. And thank you very much for inviting me to join in. This has been a really interesting conversation and I've enjoyed it. So thank you.

Rachael Kinsella: Thank you, James. I've really enjoyed it too.

 

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