Human centered investment
For the sixth consecutive year, Mercer* has won the Asia Asset Management’s 2023 Best of the Best Awards as the Asian Asset Consultant of the Year and, for each of the five years since the Award’s inception, Mercer has won the ASEAN Asset Consultant of the Year award.
Following the wins, Mercer Asia’s Wealth Business Leader, Janet Li, takes a look at two key emerging trends in asset management – the future of investment consultancy and digitalisation and finds that they have something in common: humans.
The future of investment consultancy
The investment ecosystem is ever-increasing in its complexity. The enormous number of interacting components – macro trends, geopolitics, principal-agent issue, regulations and circumstances – means there is no steady state. Instead, constant change at varying pace is the norm.
In all that complexity, investment consultants are essential in maximising returns per risk unit. They guide asset owners with expertise, knowledge, and research, helping to balance returns with risk and governance. From niche and/or strategic advice, to portfolio construction and asset allocation, investment consultants help the investment community achieve more successful investment outcomes. Better outcomes mean more prosperity and improved lives, a consequence particularly key to retirement lives.
Over the 40 plus years that Mercer has been in investment consulting, the industry has experienced major events that have shaped the competitive landscape. The results are that some players no longer offer investment consulting, with some players proposing one-stop investment solutions, and others offering investment consultancy. That evolution is likely to continue in the future, with models of consultancy engagement evolving, and new ones emerging.
Amidst the changes, a constant that will remain is the people, and the trust in those people, required for a successful asset owner-investment consultancy relationship. Trust is hard to quantify – and intangible – but vital.
Trust that consultancies will withstand short-term political cycles and alpha-seeking pressures to maintain the long-term vision, courage, and discipline required to help asset owners make the right, rather than easy, choices. Investment is both an art and a science – the right decisions help achieve better retirement lives and sustain endowment funds as well as meet ESG (Environment, Social and Governance) goals.
Digitalisation
A friend’s 13-year-old daughter was recently rummaging through the family’s storage, held up a video tape, and asked, “What’s this?”. Anyone of a certain age has a comparable story; digitalisation is observably accelerating. And technology is a great tool in investment – that’s why there is a proliferation of fin tech platforms. The platforms make selling and buying ever more efficient, robo-advisors are democratising money management, and the use of blockchain technology is creating new investment vehicles such as cryptocurrencies and tokenised assets.
What is manual and labour intensive today will be made quicker and simpler through digitalisation. While looking forward, it’s easy to be awed by the transformative power of technology and place an undue amount of reliance on it. So, it’s helpful to remember that it’s human ingenuity that created the technology in the first instance. And the importance of human capital in sound investment decisions should not be underestimated.
Without human insight, numbers and reports are, and will remain, one dimensional, because content alone does not equate to value. To add texture and significance to investment outlooks, judgement calls born of expertise and experience are essential, and the differentiator.
Technology and investment consultants can work well together to produce three dimensional outcomes. Take the Mercer FundWatchTM initiative launched in 2019, an investment ratings service providing in-depth research and ratings on funds. Analysis-led and produced from investment experts’ insights, it is materially improving the way individuals and their financial advisors are making financial decisions by providing access to the same high-quality analysis that is used by institutional investors. The AI helps to explore the voluminous data, and the humans see the investment ramifications of the key trends.
With the help of technology, the future of investment is human-centred. Created by humans, refined by humans and for the ultimate benefit of humans.
* Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 85,000 colleagues and annual revenue of over US$20 billion.