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The Digital External Asset Manager: What’s next in EAM software?

Topaz Editorial Team

Like all firms, external/independent asset managers (EAMs) have been compelled to adopt digital solutions to bring efficiencies and maintain compliance. For the most part, EAM software has provided value by transforming the information required to manage client assets from its physical format into digital. 

The transformative potential of digital solutions is much greater than turning paper and pen into 1s and 0s, however. This article will examine the state of play in the EAM software market and explain the kinds of solutions that are available and what benefits they can bring. 

Progress towards EAM digitalization 

Gartner explains that digitization is changing a process from analog to digital without any changes to the process itself. Digitalization, on the other hand, is leveraging technology to fundamentally change a business model and generate value-producing opportunities.  

While it may be fair to say that EAMs haven’t been as enthusiastic as other industries in embracing the sunlight uplands of a digitally enhanced world, progress has certainly been made. 

To sum up the current position of the EAM industry in the digitization-digitalization continuum, it is probably true to say that EAMs are digitizing their industry. But the experiences offered to an EAM’s clients and staff have not yet been fully digitalized—i.e. they do not yet make the most of the opportunities afforded by digital. 

The EAM software landscape

So, what does the EAM solutions landscape look like currently? Broadly speaking, it can probably be summarized as a mix of the following: 

  • Portfolio Management Systems—See and manage client investments, track trading and other activity, and obtain reports. To get the most value it should be integrated with custodians and with market data providers. This is principally for use within the firm, but may have a “client portal” which enables an investment data view for end clients.   
  • Document Management System—Store and manage relevant documents relating to each client.
  • Accounting System—For general money management, billing, overview of payments, analytics, and reporting. 
  • CRM—Track conversations, manage meetings, store client data, and track prospective new clients. 
  • Spreadsheets—In firms that are not as far down the digitalization journey, these will be used in place of a PMS. They are for showing and managing investments, cash flows, allocations, and reports. 
  • Chat—Default is to use whatever the client is using, WhatsApp or other. 
  • Video calls—Usual suspects of Teams, Google Meet, or other. 
  • Provide clients with access to external bank portals – Offered by client custodians to see investments. Results in multiple logins for each client.  

Some EAMs may think that, having digitized most of their processes and with many of the above items in place, “yes, we are digital”. However, in reality, they are just at the start. 

Drivers of digitalization

What are the key drivers we are seeing which will accelerate the move to digitalized EAMs?

Attracting younger clients

The future success of an advisor hinges on the ability to attract and retain younger clients. According to McKinsey, individuals born after 1965 now represent 24% of the average advisor’s client base. The rise of next-generation clients represents an increase from just 19% five years ago.        

Generation X and Y are not only the world’s first digital generations, but they are primed to become the most demanding. Actively pursuing integrated and seamless solutions, they have a clear picture of what’s technologically possible. Because of this, younger prospects will be skeptical of EAMs who cannot offer a customized, comprehensive, and immersive experience. And unlike their predecessors, the next generations will be more likely to leave even longstanding client-advisor relationships to find tailored services that meet their requirements.

Internal efficiencies and ongoing regulatory change

The regulatory environment is constantly evolving, but EAMs in particular have been at the focal point of recent regulation, most significantly in Switzerland. This is forcing EAMs to rethink their internal operations. When doing so EAMs have a unique opportunity to adapt to new regulation and leverage this change to strengthen their offering. Technology can help across two dimensions. First, systematically storing compliance related data to ensure it can be accessed efficiently when needed. Second, once the data is digitalized and accessible, EAMs can work with Fintechs which have the solutions needed to automate compliance and non-compliance related challenges.   

Creating internal efficiencies goes beyond managing a more challenging regulatory environment. It is an opportunity to create more value for clients. How? Ideally by enabling the entire organization to focus efforts and resources on value-adding solutions for their clients. 

The trends shaping the future of EAM software

The move toward further and deeper digitalization will follow three complementary paths: 

1. Continued drive to improve internal efficiencies around business operations and compliance.  

This includes the moves away from spreadsheets to portfolio management systems, further adoption and embedding of document management systems into workflows, secure document storage with audit-ready reporting and available regulator access, and increased integrations of data to enhance automated flows. 

As part of this, the PMS systems themselves will offer increased capabilities, such as analytics generated in real-time and linked to notifications for faster reactions, more planning and goal setting, the ability to manage ESG preferences, and focus on non-traditional/alternative assets, including digital assets and collectables. The push for aggregation and standardization of assets and performance details will continue, hopefully with increasing alignment with an open API standard

2. More emphasis on the importance of client engagement 

The phrase “client-centric” is a cliché that has long lost its meaning, but nevertheless remains a worthwhile goal for those companies who truly believe their customers’ needs are tantamount. What does future client-centricity look like? 

  • A focus on user experience for wealth owners, giving them the premium experience that they see elsewhere in their lives  
  • Targeting ideas and proposals, with tracking of interest  
  • Deep financial and non-financial reporting, 360-degree view of wealth, aggregated values, breakdowns by asset type, sector or geography  
  • Self-service—Clients should be able to instantaneously generate reports, sign documents digitally, add documents, and update identity and other information.   
  • Paperless onboarding—Including identity authentication, data capture, document archival, and digital signatures among other things. 
  • A news hub that combines portfolio data with news (financial and non-financial).  
  • Secure chat and information transfer, away from emails. Offer clients several ways to contact their advisor  
  • Advisors see the same view as clients so they can together discuss exactly the same data, audit trails, or history of activities. 
  • Granular permissioning so only the right people can see the portfolios.  
  • Advisor collaboration—Invite the client’s advisory team, including mortgage and insurance brokers, legal advisors, and tax professionals, to collaborate in a single place to address the clients’ goals and objectives. All communications are documented, stored, and tagged for fast recall and sharing. advisors can respond quickly to client questions, easily delegate tasks to team members, and track client activity to strengthen their relationship. 

3. Intelligent personalization 

Technologies such as AI, advanced analytics, and big data hold a lot of promise for personalization.  

Wealth managers have access to infinite client data and can put these technologies to many uses. From forecasting, informing investment decisions (taking out the “emotional factor”), to analyzing client actions, interests, and risk profiles. Putting data to work open up many new untapped opportunities for wealth managers to serve their clients better – this creates a true win-win opportunity. 

Admittedly this aspect of EAM software is more of an outlier at present—the larger private banks can leverage their armies of in-house technologists and partners to explore possibilities, but for EAMs this is aspirational until Wealthtech firms can provide some shortcuts. There are also challenges around exposing and mining sensitive client data – this needs to be done in a highly controlled way.

Topaz is leading the EAM digitalization journey by providing the tools and solutions required to retain current clients and attract younger prospects. Contact us today to learn more about how Topaz can revolutionize the experience for your high-net-worth clients.