The most significant trends in the financial services and fintech sectors over the past year have included greater adoption of the cloud and other digital technologies, commission/fee compression and consolidation, according to Fred Duden, global head of product development at fintech firm Broadridge Financial Solutions. And he predicted those trends will continue into 2020.
The shift in recent months to commission-free trading by firms including Charles Schwab, Fidelity, TD Ameritrade and Wells Fargo means that “we’re seeing a [larger] focus on managed accounts, rebalancing and how” these firms can “compete from an advice perspective in a scalable way,” he told ThinkAdvisor.
At the same time, fintechs and the major players in financial services are “looking at how they can leverage” digital technology and hybrid, omnichannel strategies, he noted.
And that stands to significantly help Broadridge, which provides investor communications and technology-driven solutions to firms including broker-dealers, banks, and asset and wealth managers.
In particular, Duden predicted there will be a “continued focus” by financial services and fintech firms on digital technologies that help them optimize workflows for advisors and clients. “One of the things I think that the industry is realizing is that digital is about attraction and retention of clients,” he said. As an example, he pointed to the convenience of online bill payment as one way that banks are retaining their customers. “All your bills are set up there. Everything’s cohesive [and] it’s easy,” he noted.
Wealth management firms are increasingly realizing they can use similar methods to retain customers through mobile apps on customers’ cellphones and websites on computing devices in general, he noted.
With artificial intelligence and machine learning adoption, meanwhile, “it really comes down to defining the use cases that are appropriate for” a financial services firm to use those technologies, as well as blockchain, he said.
One factor that could be playing a role in how quickly firms in the sector adopt those technologies is whether they have the infrastructures in place to support them, he noted.
“A lot of clients are going through a modernization” that often includes “cloud journeys associated with upgrading and modernizing their stack of technology that they use — both from an application tier and from an infrastructure perspective,” he explained.
“From my experience and my six months at Broadridge,” he said, “companies … that would have said ‘no way’ five years ago” to embracing the cloud specifically “are saying ‘we’ve got to look at this’ and actually moving pretty quickly to leverage the cloud for certain areas” now, he said. “They’re looking at private cloud, they’re looking at public cloud — they’re looking at all the options that they have.”
Five to seven years ago, “it was security, security, security” that organizations were concerned about most if they embraced the cloud, he stressed. But companies have “gotten a lot more comfortable with the construct of how the cloud works and from an infrastructure perspective and its security, and the security of the applications that they may be putting into the cloud, so there’s been this slow movement to it,” he said.
Adoption picked up two to three years ago, and “the momentum is continuing,” he said, predicting that it will continue in 2020 “as long as the companies continue to see the value proposition.”
We can also expect more industry consolidation in 2020, he went on to say. Broadridge has been a major player in that consolidation and acquired seven firms in 2019 alone, he pointed out. The most recent purchase announced by the company was ClearStructure Financial Technology, a global provider of portfolio management solutions for the private debt markets.
Asked if we can expect Broadridge to continue acquiring firms in 2020, Duden replied: “We are always looking for opportunities to grow our business and grow our product suite to serve industry solutions for our clients. We’re always looking to see what is a product that we have [and] what’s the enhancement that we can do” with it.
“A big focus for us” in 2020 is also going to be Broadridge’s wealth platform and its partnership with UBS, he said, adding: “We are really investing heavily in our wealth platform and the capabilities associated with that, around” areas including the client “front-end experience, enhanced trading and rich communications, automated account servicing tools to allow for industry solutions for our clients and then the advisor experience.”
The firm will continue to ask how it can “make the advisor more efficient” and create a “best-in-class front-end wealth management experience for the advisors,” and then “enable real-time multi-asset, multi-currency servicing for the enterprise to efficiently manage their business across the wealth platform,” he said.
Pointing to a recent survey of more than 400 advisors by the firm, he noted that 21% of them identified as growth-focused advisors (25-49 years old) who were spending more money on marketing and acquisition of clients than their peers.
That underscored another ongoing trend in the sector: its aging population, he said, adding: “Part of our investment in the wealth platform is to” enable what the next generation of advisors are “going to need to be able to run” their businesses, he said.