Wealth And Asset Management 2022: The Path To Digital .

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an affiliate ofECONSULT SOLUTIONSWealth and Asset Management 2022:The Path to DigitalLeadershipA global thought leadership project produced inconjunction with:Appway, Broadridge, Cisco, eToro,J.P. Morgan Asset Management, Oracle,Protiviti, Sapient Consulting, and Vauban GroupDistribution partner: Robo-Investing

Research backgroundTo provide the investment industry with a digitalvision of the future, Roubini ThoughtLab conductedcomprehensive global research in conjunction with acoalition of organizations across the industry. Theseinclude Appway, Broadridge Financial Solutions, Cisco,eToro, J.P. Morgan Asset Management, Oracle, Protiviti,Sapient Consulting, and Vauban Group.As part of the study, we established an advisory groupof industry executives and experts to help guide theresearch and provide their insights. From April toJune 2017, the Roubini ThoughtLab team surveyed aspectrum of 1,503 investment providers from aroundthe world. At the same time, we conducted 42 indepth interviews with senior executives from financialinstitutions, consultancies and technology firms.The ThoughtLab team analyzed the survey data to spotand forecast trends across sub-sectors, regions, andlevels of digital maturity. Our economists then createdmodels to assess the impact of digital adoption oncorporate performance and provide the business casefor going digital.This report summarizes our key findings.

ContentsIntroduction. 5Section 1 An industry in flux. 9Section 2 The digital imperative.15Section 3 Staying ahead of technology.23Section 4 Digital-first engagement.31Section 5 The business case for going digital.41Section 6 Calls to action.49Glossary.57Wealth and Asset Management 2022: The Path to Digital Leadership

IntroductionLike many industries, wealth and asset managementis going through a radical transformation that willreshape the industry in the years ahead. Chief amongthe forces of change is the inexorable shift to a digitalmarketplace, which will almost certainly thrust somefirms into new prominence and leave others behind.Last year, Roubini ThoughtLab’s Wealth and AssetManagement 2021 study surveyed more than 2,000investors and 500 providers from the financialservices industry. Our results indicated that investorsthroughout the world look to manage their money inthe same way they now shop, socialize, communicate,and learn: using a range of digital tools, social media,and mobile apps. The study underscored rising investorexpectations for technology-based services and aseamless customer experience.Last year’s study also debunked a commonmisconception that only young and mass affluentinvestors want to use digital investment tools. On thecontrary, our research revealed that older and richerinvestors are even more concerned about digitalaccess than their younger, less wealthy counterparts.As in retail and other industries, the digital divide hasbeen breached, and investors from across generationsand wealth levels want the same customer experiencefrom investment providers that they are receiving fromGoogle, Apple, and Amazon.“In today’s digital era, investorsjudge investment providers notjust against their financial peers,but against technology leaderslike Google, Apple, and Amazon.”John Marcante, CIO, VanguardIntroduction Page 5

A comprehensive research programTo help investment providers respond to these tectonicshifts, Roubini ThoughtLab focused this year’s researchon how financial institutions across the industry arerethinking their strategies, processes, products, andbusiness models to meet the digital needs of investors.Titled Wealth and Asset Management 2022: The Pathto Digital Leadership, this paper provides a vision ofthe digital future for the investment industry and offersactionable insights and the business case for getting there.As part of our research effort, the Roubini ThoughtLabteam organized a cross-industry group of sponsors andadvisors and surveyed 1,503 investment providers fromaround the world. These organizations included not onlyuniversal banks and full-service investment managementfirms, but also more specialized asset management firms,mutual funds, private banks, retail banks, investmentadvisers, broker-dealers, alternative investment firms,and a range of institutional investors. To ensure aforward-looking view, our survey also covered fintechcompanies and online trading platforms.At the same time, we conducted 42 in-depth interviewswith senior executives from a similar range of financialinstitutions to gain insight into their latest thinking, bestpractices, and future strategies. We also spoke withindustry experts from consultancies, technology firms,and academia to get a more rounded perspective. Ourteam analyzed the quantitative and qualitative data tounderstand trends across sectors, regions, and levels ofdigital maturity. To validate the business case for goingdigital, our economists created models to assess theimpact of digital adoption on corporate performanceacross an array of indicators.To do this, we classified respondents into four stagesof digital maturity: (1) beginning—just starting to thinkabout digital transformation; (2) transitioning—investingmore in technology and digitalizing some elements ofthe business; (3) maturing—completing digitalization ofmany business elements, with measurable impacts; and(4) digital leader—using fully integrated systems, withstrong digital growth. We based these classificationson where respondents put their firms on the digitalmaturity spectrum and their answers to questions abouttechnology use.Interestingly, only 2.3% of the 1,503 respondentsemerged as digital leaders, and 26% as digitally maturingfirms. These digital front-runners often gave different,more sophisticated answers to a wide range of questionsregarding digital transformation. They also reportedlarger digital investment and returns.Throughout the study, digitally advanced firms emergedas bellwethers of best practice—and as a prism foranalyzing the results. Together with the insights from ouradvisory group of experts and senior executive interviews,the responses of digital leaders served as our guide to thefuture of the investment industry.We have highlighted their responses throughout thispaper to show how digital advanced firms differ fromothers in their strategic thinking and technologicalapplications. These differences will illuminate the pathto digital leadership for other firms looking to make thiscritical journey.Special thanks to the study sponsorsWe would like to thank the sponsors of Wealth andAsset Management 2022: The Path to Digital Leadership,who contributed financial and intellectual support tothis ground-breaking research program. They graciouslyprovided valuable direction and feedback during thecourse of the project. Without them, this study would nothave been possible.AppwayBroadridgeCisco Systems, Inc.eToroJ.P. Morgan Asset ManagementOracleProtivitiSapient ConsultingVauban GroupIn addition, we would like to thank Robo-Investing forsupporting our research and kindly distributing the resultsof the study.Page 6 Wealth and Asset Management 2022: The Path to Digital Leadership

We would also like to thank the advisors to our project,who offered their guidance and valuable insights. Theseinclude: Hans Peter Wolf, CEO and founder, Appway;Chris Perretta, chief information and operations officer,Bank of Tokyo-MUFG; Paloma Piqueras, global headof asset management and global wealth, BBVA AssetManagement; Markus Hujara, head of marketing andinnovation, wealth and asset management, Berenberg;Steve Scruton, president, advisor solutions, Broadridge;Preet Chhokar, practice advisor, financial services, Cisco;Taryn Widén, director of financial technology investmentbanking, Credit Suisse; Matti Ahokas, head of equityresearch - Finland, and senior analyst - Nordic financials,Danske Bank Markets Equities; Yoni Assia, founderand CEO, eToro; Elad Lavi, head of strategic projects,eToro; Vinod Raman, VP digital advice solutions, FidelityInstitutional; Matthew Peterson, senior vice president andchief wealth strategist, LPL Financial; Kathy Awanis, globalhead of digital, J.P. Morgan Asset Management; NathanErickson, partner and chief investment officer, MRAAssociates; Mark Smedley, wealth industry global lead,Oracle; Alexander Mostowfi, leader financial services –EMEA, Oracle; Stephen Gunkel, head of communications,Pictet Asset Management; Tyrone Canaday, managingdirector, technology consulting, digitalization, and fintech,Protiviti; Bryan Comite, managing director, business andperformance improvement, Protiviti; Cory Gunderson,managing director, global financial services practiceleader, Protiviti; Peter Richardson, managing director,head of Protiviti UK; Sumedh Mehta, chief technologydirector, Putnam; Maryanne Sheehan, director ofmarketing and communications, RBC Global AssetManagement; Anthony Christodoulou, founder, RoboInvesting; Dr. Nouriel Roubini, senior advisor, RoubiniThoughtLab; David Donovan, global head of financialservices, Sapient Consulting; Chirag Shah, global head offintech practice, Sapient Consulting; Joshua Israel Satten,director, fintech practice, Sapient Consulting; Jeffrey Egan,managing director, ShoreBridge Capital Partners; and CaryRubenstein, managing director, consumer, business bankand wealth marketing, Union Bank.In addition, we would like to thank the senior industryexecutives who took the time to speak with us for thispaper: Gonzalo Rodriguez, head of digital transformation,BBVA Spain; Bill Murphy, CTO, Blackstone; Clara Durodie,CEO, Cognitive Finance; Erik Steffen, head of roboadvisory investment solutions, Credit Suisse; AndrewCarmody, chief strategy officer, Digi.me; Dean Butler,head of retail wealth, HSBC UK; Paddy Ramanthan, CEO,iValley; Steven Dorval, head of advice and innovation,John Hancock; Brian Egan, private banking manager,Johnson Bank; Sanjay Matthew, financial services fielddirector, Oracle; Adam Hamm, managing director,Protiviti; Jonathan Wyatt, managing director, Protiviti;Bob Reynolds, CEO, Putnam and Great-West Financial;Mark McKenna, head of global marketing, Putnam; JeanLouis Schiltz, partner, Schiltz & Schiltz; Neesha Hathi,chief digital officer, Charles Schwab; Michael Williamson,executive director, State of Wisconsin Investment Board;Wiwi Gutmannsbauer, global head of omnichannelmanagement, UBS Wealth Management; Rainer Hauser,global head of strategy and business development,UBS Wealth Management; Shane Williams and NickMiddleton, co-heads, UBS SmartWealth; John Marcante,CIO, Vanguard; and Andy Rachleff, CEO, Wealthfront.Thank you also to the members of the ThoughtLab team:Richard Voith, Ph.D., senior advisor; Janet Lewis, editorialdirector; Julien Beresford, director of market research;Daniel Miles, Ph.D., head of applied economics; BarryRutizer, commercial director; Benedicte Clouet, head ofmarketing; Mike Daly, marketing assistant; Laura Burtner,administrative assistant and graphic designer.We are proud to be part of this initiative and hope it willhelp wealth and asset management companies find asuccessful path to digital leadership.Lou Celi, program director, Wealth andAsset Management 2022: The Path toDigital Leadership, chief executive,Roubini ThoughtLabIntroduction Page 7

Page 8 Wealth and Asset Management 2022: The Path to Digital Leadership

1An industry in fluxOur survey of 1,503 investment providers and personalinterviews with senior executives and experts acrossthe globe point to one undeniable trend: The financialservices industry is going through a massive digitaldisruption, similar to the one seen in retail and otherindustries. For most executives, the question is nolonger whether the industry will go through a digitalmetamorphosis, but how can they ensure they arenot left behind. Gonzalo Rodriguez, head of digitaltransformation, Spain, at BBVA, speaks for many whenhe says: “The industry is going through a major digitaltransformation, and it is going to look very different 5 to10 years down the road.”With the industry facing irreversible change, investmentproviders need to act now to ensure their digitalfutures. Firms out in front are already seeing leaps inassets under management, profitability, productivity,and market share. Those behind are not only paying afinancial penalty in lost revenue and cost savings, butrun the risk of falling out of the race altogether.“The digitization of theinvestment industry ishappening. If you are not yeton board, you can expect tostart losing business as you’reunable to meet customers’ everchanging online needs”Dean Butler, head of retail wealth, HSBC UKAn industry in flux Page 9

The big shiftThe convergence of digital transformation, globalizationand market trends will reshape the investment industryover the next five years (see Figure 1.1). “Digitaltransformation is unstoppable and in some cases,happening faster than expected,” says James Cronk,director, financial services at Cisco. Neesha Hathi, chiefdigital officer at Charles Schwab, believes financialinstitutions need to respond now. “Most large legacyfirms see the writing on the wall. Everyone uses Uber andAmazon and sees what’s going on there. It’s hard for meto imagine that all of those incumbent firms are just goingto sit and watch the movie happen in front of them. Theyhave a lot to lose.”Erik Steffen, head of IS&P digital wealth solutions atCredit Suisse, a leading global wealth manager andinvestment bank, is preparing for a generational shift.“The big money is still with elderly investors. When thismoney is inherited by the next generation, they will nothave the same relationship with the bank. Technology willallow us to provide them investment advice and supporttheir decision-making at a reduced cost.”At the same time, digitalization is working in tandemwith globalization to create an interconnected globalmarketplace for wealth and asset management services.This gives investment organizations direct accessto a wider set of clients across markets and greateropportunities to expand their businesses. CEOs in oursurvey ranked the rise of emerging markets and localwealth levels as among the most important trend fortheir businesses.The power of combining technology with globalization isexemplified by eToro, the social trading and investmentplatform. Since its humble beginnings in 2007, eTorohas mushroomed into a giant global marketplace linkingover 6 million users in 140 countries. “When we startedeToro,” says its 36-year-old CEO and founder Yoni Assia,“we wanted to build a platform that opened the globalmarkets to everyone to trade and invest in a simple andtransparent way.”Credit Suisse also believes that technology can enlargeits global footprint. “Digital technology can bring yourWaves of change over the next five yearsGlobalization 39%Digital shifts 39%Competition 38%Cybersecurity 37%Rise of emergingmarkets 36%Economicuncertainty 33%Investorsswitch 30%Figure 1.1: Changes respondents believe will have the greatestimpact on their organizations over the next five years.investment ideas to a much broader audience of clients,”says Steffen. “It is absolutely key—top of the agendafor senior management. In addition to driving revenuegrowth through client activation, digital transformationoffers great opportunities to leverage our business and gobeyond the limits of today’s advisory service model.”Turbulence aheadFor many of the firms surveyed, this new interconnectedmarket also means more complex risks. Over the nextfive years, surveyed executives cite growing competition(38%), data privacy and cybersecurity (37%), andeconomic uncertainty (33%) as changes that will have alarge impact on their businesses. The perception of riskvaries considerably by type of institution, location, andexecutive role.For example, competition is a bigger worry for fintechs(48%) and full-service investment providers (43%), whiledata privacy and cybersecurity are seen as higher risksby firms in the Middle East (48%), the UK (45%), and, notsurprisingly, by marketing teams (45%).Adding further complication, executives expect a growingmaze of global regulations (see Figure 1.2). This includesgreater scrutiny in areas such as conduct and control(47%), risk management (46%), fintech (40%), anticorruption (38%), and cybersecurity (37%).Page 10 Wealth and Asset Management 2022: The Path to Digital Leadership

Regulatory pressures aheadConduct and control47%Risk management46%Fintech products and services40%Anti-corruption38%Cybersecurity37%Data privacy37%Anti-money laundering34%Tax reporting33%Investor protection32%Overseas regulation32%Figure 1.2: Where respondents expect increased regulatorypressure in their regions over the next five years.These pressures vary by institution. For example, fintechregulations are naturally a larger worry for fintechs (56%)and organizations that are embracing fintech, such as fullservice investment firms (49%). Likewise, anti-corruptionpressures are higher in emerging markets (45%) and forCEOs (47%).“We work in a market incredibly driven by regulation,”says Dean Butler, head of retail wealth at HSBC in the UK.“When you’re trying to sell true advice online in a highlyrestricted regulatory framework that hasn’t kept up withthe digital medium, it can become painful.”As companies embrace technology, data privacy andcybersecurity will become even bigger issues. This isalready the case for digital leaders, which expect thegreatest regulatory pressures from data privacy (71%)and cybersecurity (68%). Investment providers haveparticular worries about recent developments in Europe,where new rules on data privacy (the EU’s General Data“The private equity industry is prime for digitaldisruption. We are essentially using the samebusiness model as since the industry wasfounded in the 1970s.”David Rubenstein, co-CEO, the Carlyle GroupProtection Regulation) and cybersecurity (the Networkand Information Systems cybersecurity directive) arecoming into force this year and next.“If you have even one European customer, the rules willstill apply, so you had better be prepared,” says JeanLouis Schiltz, a former Luxembourg cabinet ministerand a partner at law firm Schiltz & Schiltz specializing intechnology and regulation. This may be one reason whydigital leaders have honed in on these issues more thanmost, putting them on the top of their list of concerns.Although most providers view these regulations asburdensome, Schiltz believes that “clear-cut regulationcan in general foster innovation, because it ensuresconfidence—although it remains to be seen whether thisis the case for all of Europe’s new privacy rules.”For example, the digitalization of financial services hascreated an opportunity for providers of digital identity,says Schiltz—but regulation will be key. “If I were to setup a company that offers digital identities and does allsorts of checks, people wouldn’t entrust me with theircredentials and personal details unless my company wereregulated,” he argues.Rethinking strategies for a 24/7 worldThis fast-changing business and regulatory environmentis causing investment firms to rethink their strategicpriorities over the next five years. Our research indicatesthat providers are leveraging technology to improve boththe bottom line by driving efficiencies (51%) and thetop line by penetrating new customer segments (50%),expanding distribution (46%), using predictive analytics(45%), and deepening client relationships (43%).“For the large institutions we work with, the big areasof focus are creating a set of digital tools, capabilities,and experiences for

and wealth levels want the same customer experience from investment providers that they are receiving from Google, Apple, and Amazon. “In today’s digital era, investors judge investment providers not just against their financial peers, but against technology leaders

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