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Building digital capabilities in investment management

Meeting evolving customer expectations

The investment management (IM) industry has been going through digital disruption for some time now. Investors from across generations and wealth segments prefer digital service channels ranging from online wealth management and investment tools to robo-advisers.

January 24, 2018

A blog post by Rohit Kataria, senior analyst, Deloitte Support Services India Private Limited.

Expectations for digital customer experiences are rising, especially among younger demographics. According to a Vanguard research study, in 2015 and 2016, 85 percent of the firm’s retail clients registered for digital access through web or mobile application. Among those clients, 47 percent were in the 18–34 years age group.1

Forming a coherent digital business strategy is likely to drive success for IM firms in 2018 and beyond, as customers’ preference for digital service channels is a key contributing factor to the IM marketplace shift. IM firms with agile and efficient operating models that can create differentiated investor experiences may generate outpaced asset growth.

These results clearly suggest the possibilities for success. According to the MIT Sloan Management Review and Deloitte’s 2017 global digital transformation study (MIT SMR Deloitte Digital study), 82 percent of the respondents from IM firms agreed or strongly agreed that being a digital business is important to the success of their organization. Even so, it appears that a minority of IM firms have formed a strategy to keep pace with the evolving customer service expectations. Just 40 percent of respondents agreed or strongly agreed that their organization had a clear and coherent digital strategy.2 However, a number of factors constrain IM firms from building digital capabilities. In a survey of 1,503 global IM firms conducted by Roubini ThoughtLab, respondents ranked the following obstacles as large for their organizations’ digital transformation:3

us-obstacles-chart.jpg (532×295)

Offering services through digital platforms

This said, some additional firms have fought the odds and are offering services through digital platforms. For example, Putnam Investments’ FundVisualizer tool enables advisers, brokers, and other intermediaries to analyze and compare mutual funds, exchange-traded funds, and indices using multiple performance and risk metrics. The tool allows advisers to create and model portfolios, compare correlations, and generate customized reports for their clients.4 Such digital models may enable IM firms to deliver a seamless digital experience to the current and future investors.

It goes without saying that IM firms have to be prepared to serve the future investors. Within a generation, millennials will likely be an important segment for many IM firms. Their wealth is expected to grow to $15 trillion in the United States and $12 trillion in Europe over the next 15–20 years.5 Targeting these customers could demand a digital quantum leap to meet their expectations, as they prefer more digital trust and online relationships compared with earlier generations. Furthermore, digitally advanced IM firms could be better positioned to manage through margin pressure with their improved efficiency as they shift to target millennials.

How is the IM industry positioned to meet digital expectations? Adding in one more pertinent result from the MIT SMR Deloitte Digital study clarifies the picture: 63 percent of the IM respondents reported that they are not spending enough time, energy, and resources currently to implement digital business initiatives.6 The results point to a future where many IM firms appear to be falling behind the expectations of the customers who want services to be delivered on smart devices or web platforms. Middle- and small-sized IM firms may bridge the digital gap by considering the following critical success factors as they begin their digital transformation journey:7

  • Define a digital business strategy aimed to deliver timely and customized solutions
  • Identify areas of inconsistent and suboptimal customer experience to make improvements across the sales and servicing cycle
  • Identify the customer experience areas where implementing innovative digital solutions can increase the probability of driving new business

In order to implement the strategy, business leaders should transform initial small experiments into enterprisewide digitization efforts. The digital transformation strategy of many IM firms will call for internal training and recruiting, and partnership with a fintech firm to develop a dynamic and multifaceted platform that enables digital delivery of all services.

It is likely that many successful IM firms will begin to implement or strategize a digital business model in 2018 to prepare them for a changing future. Has your firm commenced its digital journey yet?

YinYin Yu, Cynthia A. Pagliaro, Stephen P. Utkus, “The Digital Investor - Patterns in digital adoption,” Vanguard, July 2017.
G.C. Kane, D. Palmer, A.N. Phillips, D. Kiron, and N. Buckley, “Achieving Digital Maturity” MIT Sloan Management Review and Deloitte Insights, July 2017.
“Wealth and Asset Management 2022: The Path to Digital Leadership,” Roubini ThoughtLab, 2017.
Putnam Investments’ website, accessed on January 11, 2018.
Prof. Amin Rajan, “Digitization of asset and wealth management: promise and pitfalls,” Create Research, 2017
G.C. Kane, D. Palmer, A.N. Phillips, D. Kiron, and N. Buckley, “Achieving Digital Maturity” MIT Sloan Management Review and Deloitte Insights, July 2017.
Jesse Bonanno and Jared Goldstein, “Ahead of the curve,” Deloitte, 2018.

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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