With the financial services sector facing fundamental shifts on several fronts — from the disruptive power of fintech, to reducing managerial costs, to rising regulation — firms will have to adapt or face irrelevance, says David Scandiffio, president and CEO at Toronto-based CIBC Asset Management. That means adopting a more collaborative approach that includes forming better relations with regulators and partnering with fintech startups, Scandiffio noted in remarks to an audience of financial services professionals at an executive roundtable hosted by Eagle Investment Systems and CIBC Mellon in Toronto on Thursday. (Eagle, which provides data processing and management to investment firms, is an affiliate of Bank of New York Mellon).
“We need to focus on where our value proposition as portfolio managers and distributors are, and outsource the things that we don’t have the scale in and partner with others to do that,” Scandiffio says.
Scandiffio, along with a panel of other financial services executives, reviewed the challenges that have arisen as many clients shift from active to passive investment management, often attracted by lower costs. Indeed, such issues are becoming more and more important, as regulatory changes make the costs of investing more transparent. Indeed, the “big push” for transformation, Scandiffio says, is coming from regulators, which are considering measures that could alter how financial advisors are compensated and how they perform their duties to clients, including the possibility of imposing a fiduciary duty on advisors.
Scandiffio is already a witnessing a shift within his firm toward lower-cost investment products — such as ETFs and F-class funds — ahead of proposed regulatory changes. He noted, however, that the majority of his firm’s funds remain under active management (about $110 billion out of $130 billion).
Another panel member noted that the digital universe, in particular, is playing a larger and larger role in these changes. “The industry is at a inflection point in terms of [advancements in] technology and data,” said Steven Wolff, president and CEO at CIBC Mellon. “It’s trying to transform itself from seeing itself as a securities processor to really becoming more of a data manager, and building data as a service and product.”
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BNY Mellon, Wolff added, has already anticipated client demand for real-time data about their investments and is developing a new platform to meet that need. Nexen, a cloud-based technology platform that gathers real-time information for investors being developed by BNY Mellon, can be integrated with client accounts, giving them the ability to pull as much data as they want, in the format that suits their needs.
Still, while firms scramble to get up to speed in emerging technologies such as blockchain, artificial intelligence and machine learning, they also can’t afford to lose sight of the issues that drive their day-to-day responsibilities, says Tom Secur, global chief operating officer at Boston-based Citisoft, which provides administrative consulting services, such as assistance with client reporting, to investment management firms.
“We’re a smallish … firm, with about 100 consultants spread out in North America and the U.K., and it’s a balancing act for us figuring out where to spend our time,” Secur says. “We can bop around from one blockchain convention to another, but are you going to get true ROI (return on investment)? I’m not sure when that’s going to bear fruit and fully disrupt [things].”
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