With the world now mostly going digital, hedge fund managers and the fund management industry should start moving towards digitising their workflow to not only keep up with the changing times, but also meet customers’ demands.
With the pandemic making online and digitising the new norm, this must be the way to go if businesses want to stay relevant with their market. According to a study that interviewed 1,050 IT leaders across the globe, 70% of customers’ interaction is digital. With this fact, digitalisation is no longer a negotiable component but has become a necessity.
Here are five ways digitalisation can be beneficial for the fund management industry:
Simplify and Speed Up Complex Processes
When the pandemic first started, implementing lockdowns or “circuit breakers” was a logical choice as there were no vaccines yet available. Limiting citizens’ movement was the way to curb the spread of the virus. Businesses stayed connected and operational during this period by utilising video conferencing software, such as Zoom, Google Meet, or Microsoft Teams. In fact, Zoom experienced a significant uptick, from an average of 10 million to 200 million daily users in March 2020.
These video conferencing solutions not only allow employees to work from anywhere, giving greater flexibility and choice but also by simplifying business processes for fund management companies. As you may already know, every financial advisor or fund manager must perform a know-your-customer (KYC) exercise for every new client to ensure that they do exist and their source of income is legitimate.
This process used to require investors to visit the fund management firm in person, meaning that the investor needed to set aside time and money to travel to the closest branch. Today, such a practice is no longer relevant; you can even do the KYC process via WhatsApp, the go-to chatting platform for billions of people worldwide.
Aside from the KYC process, going digital also helps streamline the registration process needed to set up an account. Traditionally, this meant investors needed to fill out multiple forms and pen signatures, which can be lengthy and tedious. By going digital and leveraging mobile devices, investors no longer need to refill forms manually as it is saved by cookies, filing the same information automatically, which gives a better customer experience.
Answer Customers’ Queries in an Instant
In today’s world, where everything can be accessed instantly, the idea of customers being put on hold when they call your business to ask for help or information is unacceptable. With online digital channels, such as chat apps, social media, or your own mobile application, customers can reach you any time of day and expect a quick response. Essentially, you need to be “always on” to tend to their needs whenever needed. Doing so will increase customer satisfaction which will pay off in the long run.
Speaking of mobile applications, they are not only platforms for customers to speak to a chatbot or a live representative 24/7, but they also allow investors to have instant access to their portfolio, whether it is 2 AM or 2 PM. This is in stark contrast with the traditional route, where investors needed to contact fund managers to know the performance of their chosen fund. After which the fund manager would contact the fund services provider to find the necessary information and relay it back to the customer.
This cumbersome process typically took days to complete, which can ultimately frustrate the customer, who expects everything to be done quickly nowadays. The same process is also applicable when a customer checks their account balance; customers can track how much they are investing via the app.
Make the Right Decision Based on Data
A crucial factor in investing is keeping your emotions in check. This also includes hedge fund managers whose job is similar to a fund manager, increasing investors’ returns. The only difference is that hedge fund managers cater to clients with higher net worth than the regular investor and have the appetite for a riskier investment structure, which may include short selling or leveraging a stock, an option that is not available to the masses.
As it becomes more complicated to manage investments in this form, it is essential to have fund management software to assess the risk and volatility based on data. The software can help you pick the right types of investments to reach a certain financial goal using data. All of this is thanks to Artificial Intelligence (AI), which is becoming more advanced and sophisticated as each year passes.
With AI, fund managers and investors have no need to rebalance their investments manually; the software can do that automatically based on the market situation at any given moment. So, the existence of robo-advisors should be seen as a natural progression in the evolution of technology impacting the industry. The global robo advisory market size was valued at $4.51 billion in 2019, and is projected to reach $41.07 billion by 2027, growing at a CAGR of 31.8% from 2020 to 2027.
However, keep in mind that robo-advisors cannot fully replace the knowledge and experience of a human fund manager. It is ideal for both to work alongside each other, complementing one’s weakness with the other’s strengths and vice versa.
Compliance and Repetitive Tasks Made Easy
Aside from building personalised investment portfolios tailored to each investor’s financial goals utilising robotics, AI, and automation also means that companies can reduce labour costs needed to do manual, repetitive tasks such as cash and stock reconciliation processes. This eliminates the need to go through the lengthy hiring process to find the right person for the job.
Additionally, fund management software can also help you instantly create the necessary investment guidelines, which is challenging if done manually since investment management agreements (IMAs) are so complex. By automating this process, the guidelines can be crafted accurately and in a risk-free way.
Digital platforms like Google Suites and Microsoft Office 365 can remind you of the changing compliance laws and what you need to do to avoid breaches or non-compliance that will result in fines.
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Endless Capacity in the Cloud
As your company grows, the amount of data you manage will likely increase. Traditionally, the data is stored in on-premise IT infrastructure, including servers and storage solutions. This means that companies need to purchase the solution and ensure adequate space to place it, which often comes in a large and bulky form.
With a cloud solution, you can scale your needs easily. Typically, you need to pay a monthly or an annual fee that increases as your storage needs go up. The offering comes from tens of gigabytes to terabytes.
Storing your data in the cloud means you are not reliant on a single device to access the data; it can be accessed from any device as long as you input the right credentials when verifying your identity. This is a shift from the traditional way of accessing a single computer to look for particular data or file, which can be time-consuming. By embracing the cloud, it gives you the ability to retrieve the right data in seconds.
As Gartner proclaimed, the cloud is a must today: “There is no business strategy without the cloud.”
Digital transformation is not optional for businesses that want to thrive in the digital landscape. Its benefits let businesses stay competitive in the market. One of the fund service providers that understands the need for digitalisation is Lanturn.
At Lanturn, we combine great service with great technology to offer businesses end-to-end financial services and solutions. We’ve built our own fund management software to service our clients. Lanturn has a proven track record in administering over S$200M in fundraising rounds for our clients, from initial seed rounds to Series C.
Read more about the digital revolution in fund management here, or contact Lanturn.
