The Future is Digital: Scaling DPM for Asian Investors

Text size

This is a sponsored article from Quantifeed.

By Alex Ypsilanti, CEO & Co-Founder of Quantifeed

Clients across Asia have typically been reluctant to embrace discretionary portfolio management (DPM) services, preferring instead to research, manage and instruct their own investment choices. There are clear signs however that investor preferences in the region are beginning to shift. And this shift opens up a number of promising opportunities for financial institutions – it enables them to accelerate digital transformation efforts, and to create new revenue streams. All by building on existing DPM capabilities.

Given the complexity of modern economies, it is increasingly beyond the capabilities of an amateur investor to match the performance of investment professionals. Moreover, while Asian clients have historically been averse to paying for DPM services, growing numbers see the appeal in handing over responsibilities to free up time for other pursuits.

This evolution in client preferences aligns with the interests of private banks and asset management firms. Growing adoption of DPM services means that they can decrease their reliance on ad-hoc, transactional revenues – which ultimately improves resilience during a downturn.

Simultaneously, we are witnessing an enduring switch to digital-first services. Today’s investors demand a rich, immersive, intuitive digital experience from their financial services provider [ – with all the convenience and depth of analysis that implies]. Meeting these expectations with clever technology gives service providers a range of other benefits.

Despite its overuse, digital transformation still has some utility in the context of DPM systems. There are inefficiencies, waste and vulnerabilities in the way current DPM processes and infrastructure are set up. There is still a high volume of manual processes and data transfers in a typical DPM operation. This can involve the manual calculation, submission and management of trading orders, potentially leading to unnecessary trading, high costs and operational risks.

A lag in recording the processing, execution and settling of transactions means that the business never has a fully accurate and up-to-date view of operations. This in turn results in weak operational controls and a higher risk of compliance breaches.

Thankfully, modern technology can solve many of these issues. Currently, DPM services are restricted to high net-worth individuals, typically with portfolios worth USD 5 million or more. This floor reflects the constraints on the number of clients a DPM team can realistically serve. However, technology tailored for DPM teams supports them by automating trading, monitoring and rebalancing portfolios at scale. The resulting increase in productivity enables investment experts to manage a larger volume of customers with portfolios well below the usual minimum threshold – allowing service providers to target new customer segments.

DPM technology integrates with existing systems to provide straight-through processing, eliminate manual errors and provide huge gains in speed and accuracy. It improves the quality of information available to the business, portfolio managers and clients, while reducing the risk of compliance breaches. However, to make this work you need a team that understands the infrastructure, workflows and connections of wealth management systems, and that can provide the right architecture. It’s important that technology shoulders the complexity of the task and not portfolio managers or customers.

DPM technology gives retail and mass affluent investors access to high-value wealth management services, typically the reserve of a bank’s wealthiest customers. And it provides them with a digital experience more in keeping with modern tastes – with access to portfolio and performance information at any time, any place on any device and a suite of management and reporting tools.

This value proposition is not just theoretical. Quantifeed is already helping wealth managers – with a wide variety of layers and systems – to scale their DPM operations and offer these services to more customers. In just three months we were able to implement a solution tailored to the needs of a service provider which created new online channels, introduced efficiencies and controls, and improved customer service. Shortly after the launch, the business was managing millions of dollars of assets on behalf of customers they were previously unable to target.

Right now, the growing appetite for discretionary portfolio management services is one of the biggest trends we see across all markets in Asia. Singapore, the private banking hub of Asia, is leading the way with markets such as Japan and Thailand close behind. In Hong Kong, many investors come from China and are also more inclined to trust professionals to run their portfolios.

Change in the delivery of DPM services is coming. And the business case for technology-driven DPM is compelling: it lets a financial institution scale and expand its addressable market. Financial institutions across Asia would do well to get ahead of the coming wave of transformation.

Disclaimer
The content of this document / communication is provided for the sole use and benefit of the recipient acting on its own behalf. It must not be attributed to Quantifeed (except internally on a ‘need to know’ basis to enable the recipient to use it for its intended purpose). It must not be passed on or otherwise distributed to any third party, or to the public or any section thereof in any place, and may not be relied upon by any such person. It is not an offer or invitation in respect of any services in any place where such offer or invitation would not be permitted, or would require Quantifeed to obtain any license, permit or consent from any securities regulator. To the extent permitted by applicable law all express or implied conditions, warranties and other terms are hereby excluded and Quantifeed accepts no responsibility for such content, save as specifically agreed in writing with the recipient.

The recipient is responsible for all content housed on its behalf within Quantifeed Software and must thoroughly review, undertake its own assessment of, adapt (as appropriate) and adopt as its own, any information or other material provided by Quantifeed to assist the recipient to develop such content.

Quantifeed does not deal in (or arrange dealings in) or advise on securities or other financial products or otherwise execute or route trading orders, nor provide asset management services, in any place. Without limitation, it does not conduct these or any other activities that are “regulated activities” for the purposes of the Securities and Futures Ordinance of Hong Kong; nor provide “financial advisory services” as defined under the Financial Advisers Act, Chapter 110 of Singapore or “fund management” as defined under the Securities and Futures Act, Chapter 289 of Singapore. Where any person to whom Quantifeed has agreed to supply Quantifeed Software wishes to carry on or procure any such activities, they and any related licensing or other compliance matters are the sole responsibility of that person and any other providers procured by it. 

This is a sponsored article from Quantifeed.

Related Tags

Company

Topic

Market