Fund managers and custodian banks are lobbying their distribution partners, such as retail and private banks, to hasten the digitization of fund sales and processing.
John Sin, head of asset servicing and digital for Greater China at BNY Mellon in Hong Kong, says the buy side has woken to the need to digitize the distribution process.
In Asia, the greatest urgency is among global houses selling cross-border UCITs funds to East Asian markets such as Hong Kong, Singapore, Taiwan and Korea.
“There’s a big push to adopt new technology for sending and collecting investor orders,” Sin said. “Asset managers are engaging technology providers in order to scale distribution more efficiently.”
UCITs are funds from Europe, usually domiciled in Luxembourg or Ireland, that are authorized for pan-European Union sales, and which East Asian regulators usually accept as well. These are the most mainstream framework for selling mutual funds internationally.
Data management key
In Asia, so far, he has not seen experiments in adopting some of the blockchain-based solutions that some vendors are promoting in Europe, as reported by DigFin last month.
Custodians like BNY Mellon, which safekeep assets on behalf of both fund managers and big asset owners such as sovereign wealth funds or insurance companies, are more likely to be in competition with such platforms.
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BNY Mellon recently surveyed asset managers globally. A majority of buy sides say they intend to increase their use of fund platforms and fintechs to sell products, and 80 percent say they will increase selling directly to consumers (which remains rare in Asia). Few are putting so much emphasis on financial planners or banks, although in Asia banks are by far the biggest channel available.
Shifting to platforms, fintechs, or direct-to-consumer sales is one reason why 83 percent of asset managers told BNY Mellon they are focused on rolling out digital distribution methods. A smaller majority is also rolling out APIs and other software tools for data analysis and insight.
Sin told DigFin that although Asia-based asset managers were only about 10 percent of firms surveyed, their responses are in line with global trends. There are also new drivers in the region that make digitization more important, such as Hong Kong’s new Wealth Connect program to enable Hong Kong-domiciled funds to be sold to mainland Chinese clients.
“Fund managers are asking their bank distributors to be more tech-based. The benefit to distributors is faster turnaround of information, such as confirmation notes [of fund sales] or things like dividend updates.”
He says asset managers in Asia are looking for vendors or custodians to help them with data management. “Fund managers receive a mountain of data from different sources, and a lot of it is unstructured,” he said. “They are adopting cloud computing to help turn this data into investment insights, as well as for processing.”
According to the survey, a majority of asset managers want digitization to improve real-time portfolio or account information, to improve self-service options for clients [such as using chatbots to supplement call centers], and to improve efforts to personalize client service.