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Active managers under pressure to show value

There’s room for active asset management and personal financial advice, despite the growth of passive and robo-advisors, according to panelists at Fund Forum Asia 2017 in Hong Kong.

Active asset managers will have to change some aspects of how they work. “[They] have to be increasingly benchmark-agnostic,” said Ben Waterhouse, head of intermediary business for Southeast Asia and the Middle East at Fidelity. “They need to be able to show that they can deliver alpha through the market cycle.”

Research shows that human interaction is still very important, he said. But technology can supplement it by allowing wealth managers to scale the business by efficiently serving more clients. Technology can also fill the “advice gap” – provide solutions to people who “are less interesting to wealth managers focused on high-net-worth individuals”.

Sundeep Sikka, executive director and CEO at India’s Reliance Nippon Life Asset Management, sees a limited role for fintech in wealth management.

While robo-advisors and other fintech solutions will likely drive the commoditisation of the industry for retail investors, “it is not going to change the industry the way Amazon changed consumer goods”, he said.

“Wealth management is really different,” he argued. “Fintech will be important to increase the reach, but it can’t give a personalised solution.”

In other areas, however, fintech has the potential to reduce costs and make operations more efficient. For example, the delivery of services on the operations and administration side, in particular in the know-your-customer and anti-money laundering aspects, noted Eleanor Wan, CEO of BEA Union Investment.

Regulators push fintech

Technology can improve access to wealth management for retail investors and savers, a goal that some regulators also have in mind.

Taiwan’s regulators have helped initiate an online platform called “Fund Rich”, giving customers access to all funds on the market. The aim is to give investors easier access to funds and to reduce the average expense ratio through transparency and competition.

Nevertheless, while this initiative makes it easier for investors to buy funds, they still need advice and guidance on which products to buy.

“The regulators recognise that there’s room for advice, there’s room for active asset management,” said Ashwin Mehta, chairman at Nomura Asset Management Taiwan.

In India, regulators are aiming for commoditisation of wealth management products for retail investors more directly, at the product development stage.

“All asset management companies would have similar products,” said Sikka. “This approach would standardise the nomenclature and composition of fund portfolios. For high-net-worth individuals, on the other hand, regulators would allow “as much innovation as you want”.

Part of the Bonhill Group.