In the complex tapestry of today's financial market, asset managers navigate through a labyrinth of challenges ranging from compliance to real-time reporting. Central to these challenges is the ever-evolving concept of “consumer duty”, which demands a degree of transparency and efficiency that traditional tools such as spreadsheets can no longer deliver. Consumer duty regulations, which regulated firms in the UK are expected to report to their boards by 31st July 2024, are pushing asset managers towards a more consumer-centric approach. The expectations of real-time access to data, coupled with the need for accountability, present a unique set of challenges - challenges the fund management industry need to respond to as investors increasingly want to be able to deal 24/7, typically on their mobile devices. The days of making an appointment to discuss your finances with your bank manager or stockbroker have long gone. But using AI-powered assistances to make a more personalised interactive experience is set to potentially revolutionise the way is which advice is given and funds are selected.
In a world where algorithmic trading dictates market movements and digital transformation reshapes industries, asset managers are grappling with unprecedented challenges. From adhering to ever changing regulations to ensuring robust reporting, the asset management industry stands at a crucial junction. The sector's transformation towards digitisation isn't just a trend; it's a necessity fuelled by the demand for real-time data, transparency and efficiency. The asset management industry is evolving beyond the era of ad hoq spreadsheets to a more dynamic ecosystem underpinned by digital innovation. According to PwC, the value of funds will reach in excess of $145trillion by 2025, so the need for them to be digitised becomes increasingly critical. To what extent this trend to digitisation will be driven, not by sales but by compliance, is something we will wait to see. Currently, excluding exchange traded funds (ETFs) are prices of many funds are calculated once a day and the price is established by the asset management firm. However, for a digitised fund, investors can deal 24/7 with the price of buying and selling established by independent market makers, in the same way quoted shares are priced. It is therefore easy to see why regulators will gravitate to funds being digitised, especially as we see the transformation of the way in which wealth is to be managed - given the rise of ‘robo-advisory services” which Deloitte claim could be managing over $16trillion by 2025. As demonstrated by Calastone (which claims that over 60% of asset managers still use faxes), the scale of the task ahead for asset managers is immense. Quite simply, if details about a fund are held on paper stored on a desk or in a filing cabinet, regardless of how well the fund is performing, how can a robo-advisor even discover the fund, let along analyse it credentials and select it for an investor? The demand for immediate, immutable and transparent data has never been higher, and the solution lies in leveraging blockchain technology.
Blockchain, with its decentralised ledger, offers an immutable record of transactions and asset movements, fostering transparency and trust. Unlike traditional spreadsheets, which are susceptible to human error and manipulation, a blockchain-powered solution ensures that data, once entered, is tamper-proof yet still accessible to authorised parties - in almost real-time, 24/7. This transformative technology can distil complex fund portfolios into a clear and actionable dataset, revolutionising how information is collected, managed, reported and presented. Blockchain-powered platforms offer the promise to present the essence of their investments, enabling them to make informed decisions with confidence. Asset managers today are faced with the daunting task of collecting, verifying and reporting data across a wide array of investments. It would seem that spreadsheets and documents are being replaced by the digitisation of data that is readable, both by machine and the human eye. The frustration is that, in reality, much of this information is often trapped in the silos of outdated spreadsheets - thus ripe for a digital revolution. Blockchain technology, characterised by its immutable and transparent nature, stands as the perfect antidote to the opacity that has long plagued the industry. Furthermore, algorithmic trading and digital fund documentation push the industry towards an inevitable future where blockchain isn't just an option - it's the backbone of a modernised, digital-first approach to asset management.
As we embrace this technological pivot, The Universal Reporting Network (TURN) stands at the vanguard, offering a blockchain solution tailor-made for the asset management industry's evolving needs and its advisors. TURN represents a paradigm shift - away from outdated methods and towards a decentralised, transparent platform. The journey towards blockchain adoption isn't without its challenges, but the potential benefits far outweigh the hurdles. The asset management industry's embrace of blockchain isn't just about keeping up with technological advancements; it's about paving the way for a future where integrity, accuracy and strategic insight are inherent in every transaction. Blockchain technology in its simplest format offers an alternative way to store and share information and, being cryptographically secure, can do so safely in a decentralised manner. This therefore offers an additional benefit since decentralisation of data storage addresses the need for regulated firms to have robust disaster recovery plans. In turn this enables data to be held as a single source of truth that is not just resistant to tampering but also accessible across organisations and geographies. This not only simplifies the process of data collection and presentation but also ensures that asset managers are armed with the most up-to-date information to make strategic decisions. Blockchain's ability to provide a transparent ledger of all transactions and asset movements means that the entire investment journey can be tracked and audited with ease. This transparency is not just beneficial for compliance purposes but also acts as a driver for building trust with investors and regulators alike. As the industry moves towards a more digitised approach, the way funds are managed and reported will undergo a significant transformation. Blockchain's role in this transformation is not just as a technology provider but as a strategic partner that enables asset managers to stay ahead of the regulatory curve whilst meeting the demand of investors who want information about existing and potential investment opportunities around the clock.
This article first appeared in Digital Bytes (22th of October, 2024), a weekly newsletter by Jonny Fry of Team Blockchain.