Biba Homsy of Homsy Legal, Charles Sayac of Amundi Technology and Olivier Portenseigne of FundsDLT are seen during the “How can evolving digital transformation enable retail investors' cost-effective access to investment solutions?” panel at the Association of the Luxembourg Fund Industry’s Global Distribution Conference, 21 September 2022. Photo: Romain Gamba/Maison Moderne

Biba Homsy of Homsy Legal, Charles Sayac of Amundi Technology and Olivier Portenseigne of FundsDLT are seen during the “How can evolving digital transformation enable retail investors' cost-effective access to investment solutions?” panel at the Association of the Luxembourg Fund Industry’s Global Distribution Conference, 21 September 2022. Photo: Romain Gamba/Maison Moderne

Investment funds need to become more like cryptocurrency platforms, in terms of making it easy and accessible for retail investors, attendees have heard at an industry conference this week.

Fund firms need to embrace digitalisation to reach more clients, create better products and keep costs down, and stay relevant with younger consumers.

The comments came during a panel on digital transformation at an Association of the Luxembourg Fund Industry conference on Wednesday.

Biba Homsy, founder of the law firm Homsy Legal, who moderated the discussion, started by asking panellists “why are we talking about digital transformation?”

The world has changed and investors are changing the way they interact with products, including financial products, was the opening remark by Olivier Portenseigne. He is CEO of FundsDLT, a Luxembourg-based digital fund distribution technology provider. Some younger people prefer to buy cryptocurrencies rather than funds, not because of risk, but “just because it’s easier.”

Replicate crypto buzz

Younger people are engaged with crypto because “most of their friends are doing it”, “it’s simple” and “it’s accessible”, said Emmanuelle Pecenicic. She is head of digital propositions and partnerships in Asia-Pacific excluding Japan at the fund firm Fidelity. In other words, it’s easy and buzzy. “That’s what we need in the asset management industry.”

Portenseigne later said that crypto platforms, facing the coming crypto winter, may seek to diversify their product offerings, which could present an opportunity for the investment fund industry. After all, crypto platform users “need to place their money somewhere”.


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Cannibalisation vs complementarity

While some firms may be reluctant to ramp up digital offerings, for fear of cannibalising existing channels, the “sooner you can cannibalise yourself, the better,” said Pecenicic.

Digital distribution is “not cannibalisation… it’s complimentary,” stated Charles Sayac. He is head of sales, wealth & distribution at Amundi Technology, part of the giant French asset management group. Direct to consumer offerings will help fund firms reach new clients and expand into new markets.

Customisation

Portenseigne observed that the investment fund industry, which relies on distribution partners, is somewhat anachronistic when it comes to its indirect understanding of their customer base. Today “everyone knows their clients, but the asset management industry is unique,” he said. “Asset managers know their distributors.”

Later he said that greater knowledge of end-investors would yield results. “Once you know your investors and how they behave,” firms can develop new products and customised solutions more successfully.

Pecenicic said such customisation was necessary to tackle large markets like China and India, and to “offer advice at scale”.

Not a silver bullet

There are limits to what digital distribution can do. Some of the mooted economies of scale are limited by local market differences. Know-your-customer and tax rules can vary widely between countries, even within the EU, Sayac stated. That means investing apps still need lots of local tailoring.

Portenseigne noted that new licenses are often needed for different types of financial products.

As for cutting costs, Portenseigne commented that direct distribution eliminates the retrocession fees paid to distributors, which can be half of management costs.