Jun 14, 2017 | Scott Kohlhoff
NLG Can Help You Navigate Anticipated Regulation Changes in Asset Management
The only constant in enterprises is change. And it is occurring increasingly faster when enabled by technology. If industry leaders don’t respond fast enough, they will lose their competitive edge and cause major disruption.
Not convinced? Since 2000, 52% of Fortune 500 companies have gone bankrupt, been acquired, or ceased to exist according to Cap-Gemini, with technology disruptions being a driving factor. The asset management industry is no exception due to increasing consumer needs and competitive pressures, along with the DoL ruling being in flux.
Let’s discuss some of the trends in the industry and how technologies like Natural Language Generation (NLG) can make change your friend, not your foe.
Due to technology and regulation (e.g. DoL Fiduciary rule), firms must re-think how much they’re charging for any non-index product. More than half of the $286 billion that flowed into ETFs last year went into products that charged a fee of 0.09% or less. The great rotation from high cost to low cost is happening before our eyes.
With the ever-growing pressure on your bottom line, client services becomes pivotal to your success. But you must do more with less. Enabling your team to automatically write reports via NLG can ease the increased pressure on a cost center, like client services, while bolstering customer communications.
More products for customers
To make up for a loss in fees, firms should be expanding their product offerings to compete with the more popular lower-cost products. Even products once thought not possible to package are turning passive. In fact, less than 10 years ago, $0 were allocated to fixed income ETFs.
Now that number is >20% and accelerating. While actively managed bond funds may still be seeing inflows, Morningstar said “U.S. equity saw $20.8 billion in outflows in January, bringing passive management closer to parity when it comes to domestic stock funds.”
More products means an increased need to supply information to customers. NLG can be used to automate the creation of certain standardized, data-driven reporting and analysis, like institutional portfolio commentary from portfolio attribution data.
Specifically, Quill can be taught your business rules, including your style, tone, and word choice. This type of customization can give your business confidence to meet stringent communication requirements.
Not your Typical Wealth Transfer
The wealth transfer that will occur over the next 10-30 years will be unlike any other. Millennials and Baby Boomers treat their money differently — Millennials lead in ETF usage and that usage is increasing.
There is a significant shift in the buyer’s persona – Millennials do heavy research, want transparency, and may not want a salesperson breathing down their neck on initial interaction. They appreciate consultants, but want the high-touch personalized outreach that was a big draw to Baby Boomers.
In order to support each customer’s needs, NLG technology enables you to provide a unique and personalized experience for your clients. It could also potentially force you to rethink how you sell to retail clients and consider the robo-advisor model. Many of these automated systems are completely auditable, which typically makes firms more comfortable with these insights being delivered directly to clients.
Advanced NLG Can Help You Keep Up
All of these changes mentioned may sound like significant work for your firm in the years ahead, particularly as pressure on your bottom line increases and the expectations of Millennials for a higher level of service and transparency continue to rise. These competing forces make it seem like you’re stuck between a rock and a hard place, but technology like NLG can help your firm scale to meet these evolving needs.
Identifying processes that are ripe for automation is the first step your firm needs to take in safeguarding for the future. Given the larger trends underway, firms can leverage AI systems like NLG to turn this sea of change into a tailwind, instead of making it a headwind for your business.