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Digital asset management: Evolution or revolution?

By Goh Thean Eu   
  • Asia
  • Hong Kong
  • Global
Industry experts share their views and thoughts at AAM’s inaugural fintech seminar

The financial, insurance and investment management industries have been undergoing disruption from various financial technology (fintech)-related start-ups in recent years. The investment industry, for example, has been disordered by US-based robo-advisory start-ups, including Betterment and Wealthfront, while UK-based start-ups such as Cuvva and Neos are disrupting Europe’s insurance industry.

Given the continuous disruption in the financial services sector, Asia Asset Management (AAM) organised its inaugural digital asset management seminar on March 23 in Hong Kong, where industry experts gathered to share their views and thoughts on the subject.

The theme of the seminar was Digital Asset Management: Evolution or Revolution? It was sponsored by Paris-based financial institution BNP Paribas and Hong Kong-based fintech platform provider FinEX Asia. The three-hour seminar comprised three panel discussions and a presentation.

Fintech and blockchain

At the first panel session, on A Future of Asset Management with Fintech and Blockchain, panellists discussed how fintech, artificial intelligence (AI) and blockchain can disrupt the asset management industry.

It was moderated by Li Cai, digital and innovation manager (Asia Pacific) at BNP Paribas Securities Services.

The panellists were Kristi Swartz, office managing director at Bryan Cave, a US-headquartered law firm; Duncan Wong, founder and chief executive officer (CEO) of Hong Kong-based CryptoBLK; Maggie Ng, CEO of FinEX Asia; Byron Chim, senior consultant at US-based consulting firm Mercer; and David Quah, co-managing director of the quantitative investment solutions team at Hong Kong’s Value Partners Group.

According to Mr. Wong, one of the changes the industry could experience as a result of the emergence of various fintech-related technologies is a shift in the talent pool, where companies “may need more IT programmers than fund managers”.

“Institutions can now vacate the entire floor of fund managers, and just have a basement full of developers,” he said.

Mr. Quah shared ideas on how his team at Value Partners Group is leveraging on AI technology in their investment strategies.

“We are a stock picking fund manager, and we use big data and artificial intelligence to give us an information advantage,” he said.

For example, by analysing hotel rates in Macau, the company can have a rough idea as to whether the number of visitors to Macau is rising or falling, information that can then be used to decide if it should invest in gaming stocks with exposure to the gambling hub, he said.

FinEX Asia uses big data and AI technology to analyse the credit worthiness of borrowers, according to Ms. Ng, who said her company is “not doing anything different than banks, but it is able to go to the borrowers at a much cheaper cost”.

“We didn’t inherit the legacy (IT) system, so we are able to (operate) at a very low marginal cost,” she added.

In spite of the ongoing disruptions in the industry, Mr. Chim said many asset managers and financial institutions have been slow to respond and have shown no urgency to develop innovative products, in part because of a lack of demand from institutional investors.

“However, I expect this to change gradually. If there’s demand from the clients, the asset managers and financial institutions are willing to do so,” he said.

In conclusion, all the panellists agreed that it is vital for the entire industry – including asset managers, regulators, and fintech start-ups – to work together.

“This is a team sport. You need collaboration in order to make it a success,” Ms. Swartz said, adding, however, that there are difficulties related to regulatory compliance, and that it will take time for the “law and regulations to catch up”.

Machine learning and AI

The second panel, on How Artificial Intelligence and Machine Learning are Transforming Financial Services, was moderated by Dr. Seen-Meng Chew, head of research at Hong Kong-based fintech solutions provider FinFabrik.

The panellists were Luc Renard, BNP Paribas Securities Services’ head of financial intermediaries and corporates (APAC); Bob Charles, head of technical advisory at insurer Coherent Capital Advisors; Martin Qiao, lead architect for machine learning automation at HSBC; and Professor Joseph Cherian, practice professor of finance and director of Singapore’s NUS Business School’s Centre for Asset Management Research and Investments.

Mr. Qiao said the HSBC Group is looking into technologies such as machine learning and AI in its front and back-office operations. He disclosed that the company is working on a chatbot solution and “several thousand” HSBC IT users are testing the product internally.

BNP Paribas Group also has big plans in the new age of technology disruption, according to Mr. Renard.

“The group plans to invest 3 billion euros (US$3.73 billion) on digital transformation initiatives between 2017 and 2020, of which 1 billion euros is on digital banking,” he said. According to Mr. Renard, technology won’t disrupt industries; it’s about “people using the technology to develop new solutions”.

Meanwhile, Mr. Charles also said there are innovations occurring in the life insurance industry that are expected to escalate over the next few years.

“Today, technology is used in the back-office to make the customer experience better. In the future, we expect more insurers to use technology to keep their customers healthy,” he said.

Prof. Cherian issued a reminder of the importance of ensuring that information and data remain secure and do not fall into the wrong hands. “The key is to ensure all players do not violate this game and exploit them,” he said.

Security issues

The second panel discussion was followed by a 15-minute presentation on cybersecurity by Liz Banburry, information security and technology risk regional manager for Asia Pacific, Europe and America at Australian lender ANZ Group. She shared information on how companies can combat cyber-crime.

“We spend a lot of time educating our stakeholders, and our users. Staff education is key,” Ms. Banburry said, adding that solutions such as “two factor authentication can significantly reduce fraud”.

Financial advice

The third panel session, which was moderated by AAM’s Senior Finance Reporter Hui Ching-hoo, was entitled Robo Advisers in Asia: Issues and Challenges.

The panellists were Thomas Achhorner, global head of solutions at Zurich-based fintech solutions provider additiv Inc; Kelvin Lei, CEO and co-founder of Hong Kong-based robo-advisory platform provider Aqumon; and Byron Wong, head of robo-advisory at Hong Kong-based stock brokerage Yunfeng Financial Group (Yunfeng).

The session began with the panellists sharing their views and plans in the robo-advisory arena. Mr. Achhorner said although many asset managers are thinking of robo-advisory solutions, only some are actually implementing them.

“I guess there are a lot of uncertainties, they (asset managers) are scratching their heads on how to go about it,” he said.

According to Mr. Wong, Yunfeng’s plans for robo-advisory is to “make it easier for people to invest”.

“Traditionally, it is only available for the high-net-worth people. If you are not wealthy, you will need to go to the bank, and go through a relationship manager for investment advice,” he said.

Meanwhile, Mr. Lei said Aqumon competes in the robo-advisory space “slightly differently”. Instead of competing against the incumbents, it offers its robo-advisory platform to financial institutions, including banks, asset managers and insurance companies.

“We basically provide them with the robo-advisory engine, so that they can be more competitive in this space,” he said.

But it’s not enough to just implement the technology. The panellists agreed that companies need to re-examine the way they communicate with customers.

“You need to simplify the process. You have to rethink it before you put the products online,” Mr. Achhorner said.