After Alibaba, which created the fastest growing mutual fund ever, now Google could enter asset management. Already because technology is revolutionizing asset management and the advance of the high tech giants it might just be a matter of time. “Why shouldn't Google look at an industry characterized by high levels of customer loyalty and strong margins?” Kpmg asks in the study “Investing in the future” where it traces the mega trends destined to change the face of the industry: from demographic dynamics to technological developments, from environmental issues to ethical behaviour. In this context, Kpmg points out, the rapid growth of technology and retail companies offering online and social media platforms will put the traditional structure of the investment industry at risk. Firstonline spoke about the challenges for the industry and future scenarios with Gianluca La Calce, CEO of Fideuram Investimenti Sgr.
As the Kpmg report notes, technology is set to play a role in disrupting the way the asset management industry works. What changes should we prepare for?
In the asset management industry access to data, data processing capacity and the role of new technologies have always played an important role. Now the news is that technology will also become a theme for the distribution side. In other words, it will acquire relevance not only in the investment management phase, but also in market and customer analysis, in proposing solutions to investors; areas in which up to now the use of technology has certainly been slower and more recent but will gain strength in the future. Just as a path linked to digitization will take hold which is already developing in the USA, while in Europe and Italy it is less visible.
What phenomenon are we talking about beyond the ocean?
In the USA, digitization in the financial sector for activities not exclusively attributable to banking and trading activities still has small numbers but with a significant growth rate. Platforms are being developed that allow not only basic operations but investment management with typical wealth management models, thus entering the highest stage of asset management activities. Also in Europe there are some of these platforms and in Italy a couple. These are platforms that aim to disintermediate traditional distribution models with a target not represented exclusively by the classic do-it-yourself but by more digitized subjects who want to manage investments in a structured way, but resorting to new investment channels.
It is conceivable that they will greatly facilitate the collection and systematization of data on a large scale.
In the long run, the diffusion of new methods of action by investors will favor the big data phenomenon, making information richer, more accessible and aggregable and opening up the application of typical marketing and consumer goods tools. And this is where the various Googles come into play.
The landing of Google and the high-tech giants is something that the leaders of the major global asset management groups are monitoring with circumspection and concern. Is the debate open among the major players in Italy?
We have certainly started talking about it but I don't think the reflection is ripe yet. In Fideuram, the topic has been the subject of in-depth analysis for some time and we have already launched projects that are very important to us
The feeling is that in Italy when it comes to technology, the prevailing approach is that linked to "simple" social strategies but not thinking in terms of revolution in the way of doing business.
On average, our market is still behind on technology and this can be seen in the general culture. Let's not forget that today digitization is further behind, also due to the delay in infrastructure. Added to this is a fund distribution market that is still very sticky, in which traditional schemes are strong and where technology is conceived more as a tool for communication and for making banking activity more efficient and not as a tool for distribution methods different.
A model that can leave passageways open to new entrants. In fact, Kpmg always wonders why Google shouldn't look at an industry characterized by high levels of customer loyalty and strong margins, such as that of asset management.
The theme is that the financial industry in the retail sector has traditional models on average because it is a service with a high human content, linked to the traditional distribution system. This fact itself has contributed to the maintenance of high margins. The presence of still substantial margins and the start of a change induced by technology certainly favors the entry of new players. For the global technology giants, the cross-selling potential is very great and being, by definition, global players, they can focus on a huge target clientele with the possibility of repaying investments much faster. On a smaller scale we have already seen a similar phenomenon in the asset management industry which is global in nature and dependent on the “scale” factor. In fact, the Italian market has seen significant growth in the market share of the major international players who, thanks to brands already established in other countries, have been able to place their products in a commercially effective and efficient way on different markets. Going back to Google, I don't know their plans but it is clear that it has strengths in data usage technology, dissemination and branding.
For this very reason, isn't there the risk of a disruptive impact if giants like Google and Facebook really start to enter the sector? After all, Alibaba has made a big splash in China with its online savings product.
We have to ask ourselves how soon and how far can this phenomenon be pushed? Will it come to represent 20% or 80% of the market? In other words, is it a niche phenomenon or is it something that will become a major component of financial distribution any time soon? Keep in mind that there will come a time when digital natives become the majority. All questions that in any case must be put in relation to one's target clientele and distribution model. In any case, until recently digitization was considered a niche phenomenon, which would have established itself with difficulty in private banking, i.e. the highest part of asset management. Now, however, in the US we see the digital platforms we have talked about making the first attempts to enter areas that might have seemed taboo such as private banking. I personally believe that it is a concrete phenomenon that will gradually gain speed, but over a strategic time horizon of years. However, I believe that in private banking the human component will remain central but must evolve in the way we interact with customers. We believe that the promoter will remain the central moment of customer service but will carry out his action with methods and tools that will capitalize on the opportunities opened up by digital.
What role do you envision for Google in the industry? Distributor only or all-round asset manager?
I think the idea that Google could become a fund producer is unlikely; I believe that market trends do not push in that direction but I believe it is more probable that one can in any case be equipped with financial intelligence to guide and guide the investment choices of one's clients.
