* Regulation driving overhaul of fund operations
* Firms boost tech spend to secure advantage
* Innovative distribution needed to draw younger clients
By Simon Jessop
BERLIN, June 9 (Reuters) - Asset managers trying to sell investment products to tech-savvy millennials need to hire younger staff who are more in tune with new ways of investing, leading industry figures say.
Financial technology, or fintech, dominated discussions at the FundForum event in Berlin this week, but to prosper from the advent of ‘robo-advice’, crowd-funding and other new concepts that appeal to younger investors, the industry needs a broader mix of personnel, delegates said.
“Tech developments are rarely done, if ever, by 50-year-old-plus people, of which there seem to be a lot of us, who have worked in the same industry for 20 years ... And that means hiring outside of the industry,” Charles Goodman, chief executive at Edmond de Rothschild Asset Management UK, said.
In a world of low returns and the prospect of far fewer financial supports than those enjoyed by their parents, millennials - who reached adulthood around 2000 - are much more conservative about where they put their money, and much less likely to put up with poor performance.
In fund manager Legg Mason’s Global Investment Survey 2016, 78 percent of millennials surveyed were more conservative/risk averse than a year ago and their exposure to equities was 9 percentage points lower than investors aged over 40.
They were also more likely to be happy using so-called online ‘robo-advice’ to help them choose investments, while fewer than one in five said they would stick with a laggard fund for more than a year.
Millennials’ investment mores are already helping some nimbler, newer asset management firms take market share from the traditional heavyweights.
At Cambridge-based Syndicate Room, which specialises in crowd-funding startup companies, more than half the workforce are women and staff are only hired if they are a good cultural fit, with the third interview typically held offsite, often in a pub or restaurant.
“We are a much more diverse workforce than you would usually find in the asset management industry and much younger as well. And that is key for us and we’re targeting a more tech-savvy customer, most of them millennials,” Chief Executive Gonçalo de Vasconcelos told Reuters.
“And for us, it’s incredibly important to understand how do they think about their investments and what steps do they take to consider where they’re going to invest their money - and they are very different from the 50-year-old-plus individuals.”
As an indication of millennials’ growing clout, BNP Paribas, in its 2016 Global Entrepreneur Report, points to the emergence of millennial entrepreneurs, or ‘Millennipreneurs’ - a new generation of wealthy prospective fund firm clients who on average generate annual company revenues 43 percent higher than companies run by the elder Baby Boomer generation.
As savings and investment products are increasingly being sold online, new technologies can reduce costs, delegates heard.
As well as ‘robo advice’, Blockchain-type distributed ledger technology could help managers trim mid- and back-office costs, around custody and trade reconciliation for example. Artificial intelligence could help portfolio managers analyse Big Data sets to make better investment calls.
“The whole structure (of the industry) is changing,” said Justin Urquhart Stewart, co-founder of Seven Investment Management. “The application of (technology) to people’s personal finance and to the investment management world is going to fundamentally change the way we go about things.”
Those that don’t adapt might not survive, said Ben Philips, partner at consultants Casey Quirk.
“The firms that have experience with consumer branding, the firms that have thought about how to adapt their engagement model and the firms that think a lot about data - how do we pull it out and deliver it back? - they’ll do best,” he said.
“The big issue is it’s not for every firm. We can’t support as many asset managers as we have now, given the way demand is changing.” (Editing by Sinead Cruise and Susan Fenton)