The business processes outlined in this article are essential to advisors, private bankers and others for putting clients’ ideas into practice and cutting through complexity.

It’s hard to avoid noticing how many new funds and investment products exist. The number of mutual funds globally increased from about 66,400 in 2009 to 137,892 in 2022 (source: Statista). Trying to sift through these to put clients’ portfolios together can only really be done with tech tools. 

The process of scrutinising what funds are available, their track records, goals, fees, managers and locations is a herculean task. Firms such as LSEG Lipper (renamed from Refinitiv) and Morningstar, for example, provide immense amounts of data. And technology businesses are understandably keen to work with them.

One such business, Instinct Digital, a cloud-based platform firm, headquartered in London, redefines how asset managers engage clients, delivering streamlined and automated fund and investor reporting in the EMEA region and North America. It became part of the Morningstar Service Delivery Partner Program in October 2023. ID provides interactive fund information pages for investors, an automated print production service so that client reporting teams can create and schedule production cycles of pdf reports at scale, as well as providing investment dashboards and reports via a portal.

In December, Morningstar said it launched Direct Web Services, a collection of application programming interfaces (APIs) which package Morningstar’s data, research, and calculation engines for financial services firms to use in their own digital solutions. 

“We are democratising and demystifying this [process of quickly finding out what information is needed about funds],” Cassian Scott, CEO of Instinct Global, told this news service. “We provide a sort of mini-Bloomberg in your pocket for the man in the street.”

“We can quickly stand up a Funds Centre – a portal for funds information for asset managers to communicate with their clients,” Scott said. “We provide an out-of-the-box product that creates factsheets and aligns all other information. It allows massive operational cost savings and speed of production.”

The sort of processes that Scott describes are essential to advisors, private bankers and others for putting clients’ ideas into practice and cutting through complexity. 

“People want data to be available in a timely manner, to their desired needs and to be reliable. There is a new onus on firms as regulation plays an ever-more important role in requiring appropriate communications and the management of brand assets to create great outcomes for end-Investors,” Scott said. 

And the arrival in late July 2023 of the new Consumer Duty regulatory regime in the UK – already producing consequences as firms such as St James’s Place change their fees – means that wealth sector players need even clearer, faster and more comprehensive data on funds.

Scott is in no doubt about where the UK wealth sector is heading.

“The direction of travel is definitely towards more regulation and, overall, the defence of clients’ best interests – we see this as a positive and an inevitable for the industry. Data, of course, can be the asset manager’s best friend in responding to these regulatory challenges,” he continued. “Regulatory challenges in asset and investment management are multifaceted, involving considerations related to global coordination, risk management, technology, sustainability, client interests, and market integrity.”
 

The business
Scott said Instinct Digital moved into the new solutions it offers 18 months ago, seeing the need to provide better, faster and cheaper data for asset management.

“We were born out of the recognition that investment and asset managers are increasingly under pressure to provide great client outcomes at less cost, whilst improving the client experience and meeting, and where possible, exceeding, regulatory expectations,” Scott said. 

“We work with asset and investment managers of all sizes. We are especially appreciated by those firms saddled with legacy technology that has come to rely upon multiple manual interventions. We take the manual out, allowing resources to be deployed on more valuable and engaging activity, and we make reporting simple. And fast,” Scott said.

Artificial intelligence is getting lots of attention in wealth management. WealthBriefing asked Scott how AI affects his firm and wealth management more broadly. 

“AI clearly offers wealth managers the ability to leverage advanced analytics, machine learning, and automation to enhance various aspects of their operations. The technology can help in tracking not only existing funds but also in identifying new opportunities and flagging potential risks or flaws in a more timely and efficient manner,” he said.

“This can lead to more informed decision-making, improved client outcomes, and increased overall efficiency in wealth management processes. We are optimistic that a data-first culture will limit the voodoo and improve the transparency and value for investors. Certainly, all the firms and providers we work with are committed to this approach,” he added.

“Firms in the financial services sector face significant challenges and resistance to digital transformation. Legacy systems, complex regulatory landscapes, and a risk-averse culture contribute to the hesitancy in adopting new technologies. The financial industry's emphasis on security and the high costs associated with technological investments further slow down the pace of digital transformation,” he said.

“Additionally, lengthy decision-making processes, cultural resistance to change, and a lack of understanding about the potential benefits hinder the adoption of innovative solutions,” Scott continued. 

Data need
A lack of data can be a headache for wealth managers. In talking to LSEG Lipper, for example, this news service was told that one big task that fund managers have is providing “back tests” to demonstrate how a strategy would have delivered over a specific period. Without such a test, a fund is unlikely to make it through the door.

The rise of fund networks and markets such as Calastone and Allfunds, for example, shows how the business of buying and selling funds has become more technologically advanced. Always, however, the potential grit in the wheels is a lack of quality data. Another factor to consider is ensuring total clarity on fees and costs – a point that regulators such as the UK’s Financial Conduct Authority keep a close eye on. Groups such as Calastone, for example, can use their collective purchasing power to obtain the kind of institutional buying muscle once the preserve of pension funds and life insurance schemes.

As one figure in the industry told this publication, the challenge of finding out information to choose funds is formidable, but the rise of AI will be important. “AI will really shape the future for investment advisors,” the figure said, noting the ability of AI tools to work through performance analysis, risk and volatility.