What a year 2020! Who could have imagined, a year ago, that the last 12 months would have gone like this? Fortunately, asset managers have always shown great resilience in adapting to the vagaries of the financial markets and changes in their environment. They have submitted their request for authorization to FINMA via the EHP platform, and they continue to take care of their clients and their teams while sharing the hopes raised by the Covid-19 vaccines. Like the health of the S&P 500 index, they augur well for a better future.
At the same time, their ecosystem is also evolving: FINMA has clarified the new rules and given more visibility on the future of the sector, the Supervisory Bodies are structuring themselves to provide the best possible support to asset managers, banks are improving their dedicated services and their custodian interfaces, and wealthtech companies are continuing to innovate to make the daily lives of asset managers easier and to widen the scope of opportunities.
In this context, what can we expect in 2021? Probably anything is possible, hoping for a better future while preparing to face the new challenges ahead.
So the question is: are we ready?
The regulator has specified the personal, financial and organizational conditions required to exercise the profession of Asset Manager. As far as the first two conditions are concerned, there is probably little to worry about. But what about the organizational conditions? Are all managers ready?
Behind this generic condition lie a multitude of subjects related to risk management and internal control, routine monitoring with the performance of a periodic audit or report on the compliance of activities with legal requirements, and good practices in terms of client classification, rules of behavior and management of conflicts of interest.
Finally, the main subject is the requirement for transparency and traceability of all information (duly collected, processed, stored and secured) and of all management acts carried out.
The advent of wealthtechs
In order to support asset managers in their development and the satisfaction of the various rules related to this information and management acts, wealthtechs have multiplied digitalized solutions (Consolidation & Reporting, PMS, Order Management Tool, CRM, Compliance & Risk Management, Admin & Invoicing…etc.) Often integrated, they allow significant time and productivity gains, while reducing operational risks, without forgetting the possibility of working remotely in an efficient and secure manner.
Beyond these “general” benefits and in a very concrete way, it now seems difficult to do business without these new tools.
For example, if, at the request of a client, an auditor or the regulator, the fund manager is questioned about the relevance of an investment made 18 months previously, how can he or she serenely demonstrate that this personalized recommendation respected the famous “pre-trade checks”, that it was appropriate and adequate, that it was in line with the asset allocation and mandate in force at the time, that the client had clearly understood the risks and costs linked to this investment, with supporting documents, and that he or she had received the client’s approval?
Without an adapted tool, this exercise remains very time-consuming, if not almost impossible to carry out because of the necessary archiving of the positions and movements of the client portfolios and all related documents. Whereas with the right tool, the response is immediate and duly justified.
Control the control and validation workflow
Similarly, digitized and collaborative tools greatly facilitate control and validation sequences, whether working internally with several teams or validation levels, or with third-party companies to which managers can now outsource certain functions such as risk management and compliance. In real life, the various players in the value chain are no longer located in the same office, remote work (home office or between several group entities) and outsourcing have gone through the same process, and exchanges by email and telephone are no longer sufficient.
In this context, wealthtech’s solutions allow the organizational conditions required by the regulator to be met, not to mention the other (many) advantages we know about. However, many managers have not yet adopted these tools, for various reasons, real or supposed. Reluctance to change, lack of time, questions about value creation…etc. The cost of these IT solutions is also mentioned, but we know that their price has dropped significantly in recent years while offering more functionality and ease of use.
Test before you adopt
Rather than arguing about the benefits of these solutions, the good news is that asset managers can try and test these new tools before buying them. Imagine walking through the door of a car dealership and coming out with the vehicle of your dreams to try it out, not for 1 hour but for 2 or 3 months, with no other investment than the time spent enjoying it: would that reassure you? Fellow managers, beyond the regulatory requirements, the highway code, are you ready to get behind the wheel?
Come try it out and have a good trip!
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