The rise of alternative funding and implications for the effectiveness of investor relations

Emerging innovations within the capital market space will continue to present new opportunities for listed companies

The value of assets managed by the global investment management industry and the amount of assets that sit within global mandates continue to rise year on year. Research from PwC predicts that global assets under management will rise to $101.7 trillion by 2020, from roughly $70 trillion today. This will be primarily driven by pension funds, high net worth individuals and sovereign wealth funds, all of whom have been steadily increasing the global component of their investment portfolios.

Tapping into this capital efficiently, however, is far from straightforward for global issuers. As a result there has been a surge of interest in alternative funding methods and new technologies, which aim to boost speed, efficiency and transparency throughout the capital markets. Where exactly is the impact likely to be largest for investor relations teams?
Tapping into this capital efficiently, however, is far from straightforward for global issuers. As a result there has been a surge of interest in alternative funding methods and new technologies, which aim to boost speed, efficiency and transparency throughout the capital markets. Where exactly is the impact likely to be largest for investor relations teams?

Supply-demand matching

First, we can expect to see improvements in how companies target investors. Currently the tools for efficiently understanding who is interested – and to what level – in a given investment story, whether on a deal or non-deal basis, do not exist today. Technology drives the matchmaking process across a multitude of industries. The finance industry has arguably been one of the slowest to embrace its potential to improve the process for the 40,000-odd listed companies and more than 100,000 institutional investors.  Potential benefits include increased accuracy of targeting, a greater degree of access and control, reduced cost and a more diversified range of options.

Peer-to-peer funding platforms for listed companies

Second, we can expect improvements in how companies reach and engage new pockets of liquidity, especially within the retail investor segment. Investment-based “crowdfunding” (or market place investing— both equity and debt) has existed in limited forms for several years through online sites that allow investors to invest in specific projects predominantly for private companies. This model allows companies to raise capital to fund new ideas and more importantly, cultivate new clients who now feel they are participating in the growth of their businesses.

These new marketplaces may work in tandem with existing processes. The crowdfunding platform SyndicateRoom has revealed a tie-up with the London Stock Exchange that will allow ‘crowdfunding investors’ to participate in initial public offerings and placings on the main market of the LSE and AIM.


Blockchain applications

Third, we can expect vast improvements in efficiency and transparency in a variety of shapes and forms. One such form will be Blockchain technology applications within the equity and debt capital markets, which aim to tackle the vast inefficiencies which adversely affect the industry today through a centralised, digital ledger.

The scope of Blockchain’s pilot projects in this area has grown exponentially over the last three years. While these projects have so far generated more hype than tangible applications, the benefits that ‘distributed ledger’ technology can bring to the broader industry seem appealing enough to continue with its funding and development. The prize on offer, as one consultancy recently put it, is a new architecture, where all capital market participants work from common datasets, on an almost real-time basis, and where supporting operations are either streamlined or made redundant.

To take one example of what is already being done, BNP Paribas has designed a pilot scheme permitting private companies to issue securities on a primary market with e-certificates, developing a ‘live’ share register and access to a secondary market all via blockchain technology. We should expect similar progress in the near term in public markets, with increased accuracy in the identification and recording of shareholder movements and interactions.

Initial Coin Offerings and fundraising

Lastly, in niche areas, we can expect new blockchain based applications to support the fundraising process. Initial Coin Offerings (ICOs) are a fundraising exercise for cryptocurrency tokens such as Bitcoin or Ethereum, and have received a lot of press in recent months. Speculators continue to chase this new asset class. While these might at face value seem like attractive fundraising structures, they are ultimately of limited interest in a corporate context. The recent moves by the SEC (stating in July that cryptocurrency tokens can be securities) and China (banning fundraising through ICOs in early September), mean that an ICO is unlikely for the time being to work in an established corporate outside of a new tech startup scenario.

For IR officers, there are nevertheless some newly emerging areas of interest which are raised by the cryptocurrency experience.

  • ICOs have turned the traditional fundraising process on its head, marketing for a long time then fundraising in a matter of hours. The co-founder of Ethereum said “We managed to grow our base of ambassadors by attending meetups around the world, targeting groups and leaders in certain communities. Once they got on board… about 9,000 people participated in the crowdsale”. Might traditional equity capital raising follow this in certain circumstances, for instance where the fundraising is well flagged? For instance, a company with a well-prepared public market-style equity story can spend time educating potential target investors for up to two years pre-IPO. The public phase of the IPO could then be significantly cut.
  • The rise of cryptocurrency as a liquid means of exchange, irrespective of the underlying use-case, suggests that corporates could treat cryptocurrency as one of the currency options for the fundraising. In August this year, Fisco used a 200 bitcoin 3-year bond (worth $860,000 at the time) for an internal M&A transaction, as a test case with Japan’s approval of bitcoin as legal tender.
  • Primary transaction processes are slow, and investors who are not existing clients of the banks managing the deal are usually not able to participate. Blockchain authentication of the investors’ know-your-customer (KYC) status would broaden the addressable investor base. And this is just one application. In July this year, Daimler used a private version of Ethereum in a test case to issue a €100m 1-year bond. This used Blockchain to manage the whole transaction cycle from origination, distribution, allocation and execution of the loan agreement, to the confirmation of repayment and of interest payments.

The journey from today’s system to a new paradigm for our industry will take time. The obstacles to be overcome along the way may be significant, and it is far from clear what will ultimately emerge. However there is little doubt that technology will eventually transform our industry faster than we think. We can take clues as to how this may happen from examining just how communications, music, transportation, or even video rental industries have been transformed in the last 5 years alone. As in those industries, the finance industry will come face to face with huge opportunities, the beginnings of which we can see today.

The article was co-written by Michael Chojnacki from Closir and Julian Macedo from ECM Team and originally appeared in fall edition of IR Society’s Informed magazine.

 

Key takeaways from FundForum 2016

Earlier this week, over 2000 global investment and wealth managers came together at the annual Fund Forum in Berlin to discuss the main trends affecting the industry. Although the scope of the discussions was broad, there were a number of topics which were at the heart of many of the debates and conversations throughout the 3-day event.Here are our top 5: 

Robo-advisors and technology

Tom Brown, Global Head of Investment Management at KPMG, segmented the issue of technology and digital disruption in the asset management industry into three main areas: customer experience, operational efficiency and the use of technology to manage money.

Robo-advisors – online wealth management platforms that provide automated portfolio management advice without the use of human financial planners – are perhaps the industry’s best example of all three points rolled into one. While the technology is still relatively new, use of robo-advisors has been growing exponentially, especially amongst the younger generation, which today prefers to view and manage its pension savings using a mobile app rather than going into a bank branch.

A number of traditional asset managers have equity stakes in robo-advisory platforms, aiming to strike a balance between traditional and technology-based approaches under the umbrella of an established, credible brand name. Others argue that artificial intelligence and machine learning will eventually lead to the demise of the fund manager entirely, the argument being that machines can do what humans can do but better. Consumer behaviour will adapt to the new environment as it always has done when presented with innovative leaps forward such as self-service checkouts, online interactions and soon, driverless cars.

Blockchain

In October last year The Economist devoted their cover story to Blockchain: “The trust machine: how the technology behind bitcoin could change the world”. In simple terms Blockchain is a digital, trusted, public ledger that everyone can inspect, but which no single user controls. It keeps track of transactions continuously, for example ownership of a diamond, rare painting, or piece of land.

The asset management industry continues to debate the potential applications of this technology, which started out by powering Bitcoin. In a panel moderated by Lawrence Wintermeyer, CEO of Innovate Finance, ideas ranged from Blockchain’s applicability in areas such as post-trade environment, collateral and liquidity management, regulatory reporting, and the handling of know-your-client (KYC) and anti-money laundering (AML) data. In each instance success will require close collaboration amongst the various parties involved.

Brexit and Trump

Mohamed El-Erian, Chief Economic Advisor at Allianz, addressed some of the shifts that are giving rise to the anti-establishment movements seen in many developed countries today.

“The common element throughout all these things,” he explained, “is that the advanced world has lost the ability to grow in a fair and inclusive manner, and when that ability is lost and people lose confidence, things start going wrong.”

El-Erian stressed that global growth to unlikely to be consistent and stable any time soon, thus the risk of non-normal distribution of events affecting the markets is always an issue. Secondly, he highlighted central banks’ inability to rein in financial volatility, which remains as frequent and unpredictable as ever.

The discussion centred on the fact that investment managers should try to adopt new framework about how they think about risk, and acknowledge that market events in both developed and emerging markets no longer follow a normal distribution curve.

Is ‘data’ the new gold?

A number of panels focused on the industry’s ability to understand and utilise the unprecedented amounts of data that are generated by each one of us in the digital world.

“By 9 o’clock each morning we have already created more data than mankind created from the beginning of time to the year 2000” said Andreas Weigend, former Chief Science Officer at Amazon.

“Because of the signals you send through sensors, microphones, GPS, gyroscopes and cameras, your phone knows almost everything about you: where you are walking and even how you are walking – it probably knows more about you than know yourself”.

Crunching and refining data such as these enables the industry to improve and tailor its products a lot more to client needs.

Costs and Transparency

The new European MiFID rules are due to take effect in early 2018 and will require funds to give more information on costs in their fund factsheets.

EU and UK regulators are demanding fairer and more transparent fees from fund managers in a bid to ensure greater transparency and accountability to investor clients. As discussed in previous blogs, as part of this process they are also assessing which costs should be borne by the asset manager and which can be passed on to the end client through management fees and commissions.

The new regulatory environment is forcing asset managers to rethink a number of elements of the traditional business model, such as how they consume and pay for investment research.

With technological innovation comes regulatory oversight. Those able to react quickest to the dual challenges of new regulations and market unpredictability are most likely to succeed.

Conference website

Full agenda

Technology’s potential to ‘emerge’ markets

Earlier this year, one of the largest remaining ‘closed’ emerging markets, Iran, followed Saudi Arabia in opening up its stock market to foreign investors as financial sanctions were officially lifted following last year’s breakthrough nuclear deal between Iran, the US and other world powers.

Emerging and frontier market fund managers are now looking closely at Iran to evaluate its investment potential, as shown by the rapidly growing number of Iran-focused funds as well as the increase in investor travel to Tehran during the last six months. The Tehran Stock Exchange already has a large, diversified and liquid stock market with more than 400 listed companies and a market capitalization of around $90bn. On top of this, the country’s IPO pipeline is potentially as large as $100bn, an enticing prospect for international investors looking for growth opportunities.

Before they are able to invest substantially in Iran, investors must first satisfy internal compliance teams by getting to grips with a market where investor relations and corporate governance standards still have a lot of catching up to do. This is usually a long and fairly painful process as investors, companies and regulators move at different speeds, speak different languages and follow different practices.

Technology could play a vital role in helping companies in countries who are entering the global capital markets arena for the first time, such as Iran and Saudi Arabia, to integrate and engage with the international investment community. It’s probably fair to say that the success of technological innovation in this area will be based largely on its ability to help companies to level the playing field between global investors and local investors.

The investor relations community has been slow to embrace innovations which are already revolutionising other industries. A Google Street View of the Emirates Airbus A380 for example gives travellers a full virtual product tour of the plane from their desks. Bernie Sanders used the 360 interactive video to great effect at his rally in the run-up to the Iowa caucus.

For most fund managers, there is no substitute for a face-to-face meeting or a company site visit, during which they can see the whites of management’s eyes and walk around the corridors of the company’s headquarters. But as global portfolios become more and more diversified, technology could help investors to cover more ground by increasing the effectiveness of ‘remote’ engagement at a fraction of the cost. Forward-thinking IR teams could adapt 360 technology to enable analysts and investors to interact not only with company premises, but also with senior executives and product managers. In a few years, the Oculus Rift headset could take this idea a step further to provide an even more immersive experience.

Simple smartphone applications allow ordinary consumers to order taxis, find dates, book flights, order takeaways and operate their central heating from the office. They allow warehouse managers to control stock and doctors to monitor patients’ blood pressure. At the same time, IROs and fund managers still rely heavily on emails, phone calls and business trips to conduct most of their daily tasks, which require time, money and organisation. In this environment, it is perhaps unsurprising that the process of building knowledge, trust and confidence in a company or market takes as long as it does.

For innovation to be embraced, it must make the fund manager’s job more efficient without forcing him to surrender his competitive edge or limiting his access to the company in any way. It must help the IRO to tell the company story more efficiently and to a wider audience. The opportunity for such a solution is perhaps greatest in emerging and frontier markets given the lack of existing IR infrastructure and desire for short-term international growth. Despite still being relatively undeveloped from a global capital markets point of view, countries such as Iran, China and Indonesia boast increasingly tech-sophisticated consumer markets, which perhaps bodes well for their respective corporate counterparts.

Technology innovations could offer open-minded IR teams in emerging and frontier markets a unique chance to quickly close the gap between them and their richer, more experienced developed market rivals. The lack of an existing process for engaging with international investors may even give them an advantage over established companies reluctant to think outside the box and adapt.

This article first appeared in the spring edition of UK IR Society’s magazine ‘Informed’.

2016 Global Trends in IR

BNY Mellon Depositary Receipts group has very recently published their annual report on global trends in investor relations. With 550 companies surveyed from 54 countries, it is probably the most comprehensive barometer of the current themes in our industry. The report provides large amount of comparative information on how listed companies are adapting to the changing marketing condition, touching on topics such as budgets, allocation of management’s time for buy side meetings, reporting lines, use of sell-side, measuring team effectiveness as well as insights into evolving areas such outreach to ESG investors and the use of technology.

Firstly as a qualifier, lets consider the demand side dynamics for global issuers. Despite the inevitable short and medium term swings in investor appetite for a given asset class, market or industry evidence that investors all around the world are diversifying and are increasingly adding a global component to their portfolios. Our own analysis point to over 4,000 institutional investors who hold emerging market securities, versus only 400 in early 20oo’s. BNY Mellon’s own estimates point to number of investors that hold DRs (or, roughly translated as those with global mandates) has increased from from 3,261 in 2Q10 to 4,533 in 2Q15. This figure will, we believe,  continue to grow, and present opportunities in areas where a- investors previously held most domestic bias and b- have considerable assets under management in active management and c- see diversification opportunities globally.

With this backdrop, a couple of things to note from the survey:

  • IR teams are working harder to address the growing global investment opportunity.  This is evidenced by 1- investor meetings taken by C-suite executives and IROs inside and outside their home markets have increased by 12.6% compared to 2013 (from 250.6 meetings in 2013 to 282.3 meetings in 2015). 2- companies almost doubling their IR budget allocation to travel, from 12.8% in 2013 to 24.3% in 2015, which in turn is interesting to contrast with the slight decrease in companies holding analyst/investor days (63% to 59%).
  • Top 10 sources of new investor demand in five years time, according to surveyed companies, will split evenly between emerging and frontier market. US, UK, China, Germany and Singapore lead the pact.
  • Technology tools, such as  conference call/webinar and video conference calls has been increasingly used in toolkit of a global IR officer (72% in 2015 vs. 63% in 2013 and 41% in 2015 vs. 34% in 2013). With the management and IR team time relatively fixed, and the buyside universe expanding – there is no element of a doubt that tools that help reach new investors can increase reach and efficiency, at a fraction of a price. We are strong advocates of using new tools to tell a company story . Can any one see how virtual reality or 360 videos can be applicable to the world of investor relations?
  • Despite the wave of regulations on how investors will pay for research and cooperate access, brokers continue to dominate the company non-deal roadshows arena, however with some signs of this changing. 10% of companies have organised NDRs themselves, up from 5% the previous year. Interestingly, companies rely a lot less on brokers nowadays to provide them with post meeting feedback, and rate quality targeting and introductions at upmost importance.
  • Growing ESG focus – The survey notes that there has been a strong increase (from 37% to 46%) in companies who have strategies in place to communicate with key investors on corporate governance issues on a regular basis, with top issues addressed being Board composition (76%), Transparency and disclosure (71%) and Remuneration (60%). Despite that the actual number of investors who reach out to ESG focused investors is still low (30%), however likely to rise. There is evidence to suggest that institutional investors are increasingly committing to ESG-focused principles in their strategies — whether that be through a more active engagement as shareholders or divestment strategies. 

Source: BNY Mellon Depositary Receipts Market Review 2015, BNY Mellon Global Trends in Investor Relations 2015

Have IR professionals lost their enthusiasm for social media?

This is a guest blog post from Sandra Novakov, a Director with Citigate Dewe Rogerson’s Investor Relations practice. Citigate Dewe Rogerson is the leading international consultancy specialising exclusively in investor relations, financial communications and corporate public relations.

Citigate Dewe Rogerson conducts an annual survey into investor relations trends across Europe and one of the topics which has yielded somewhat surprising results this year is the use of social media in communications with analysts and investors.

Looking back two years, when social media channels were expected to have a profound impact on the dynamic of communication between companies and their investors, it seems excitement levels have since dropped significantly.

The findings of our survey show a decline in the popularity of social media when it comes to five out of eight IR activities shown in the figure below. Whilst nearly all companies used these channels to publicise news and events in 2013, this figure has now dropped 26 percentage points, to 65%. Another notable change can be seen in the popularity of IR blogs – only 12% of IR teams use these to promote their views against 23% in 2013. So this is, somewhat ironically, an IR blog about the declining popularity of blogging in IR.

Screen Shot 2015-08-05 at 13.54.31

Looking at trends in other IR activities, one thing is clear. The declining use of social media by IROs is by no means indicative of declining engagement levels with investors. When it comes to roadshow activity, 46% of companies are planning more meetings in 2015 compared to 2014. In particular, following several years of focus on continental Europe and Asia, there is a clear shift towards targeting US investors in 2015. In response to declining broker support when it comes to corporate access as a result of tightening regulations aimed at preventing fund managers from using dealing commissions to pay for services outside of research, companies are also taking greater control of investor targeting – only 5% rely solely on brokers and 24% are investing in either targeting tools, personnel, or both, with the aim of increasing their in-house competence. Furthermore, engagement at Board level is on the rise with a greater number of chairmen and non-executive directors seeing investors on a regular basis.Looking at the possible drivers of this trend, we see several contributing factors. Firstly, companies are increasingly more disciplined about their use of social media – 45% state they have a formal social media policy, against 38% in 2013. This undoubtedly slows down the process of issuing a tweet or publishing a blog, thereby restricting somewhat the effectiveness of such communication channels. Secondly, IROs have come to realise the significant time commitment that regular social media engagement requires leading some to the conclusion this is not the most productive use of their time. Thirdly, the extent to which investors value disclosure through such channels, in addition to the announcements and direct engagement they receive on a regular basis, remains debatable.

In addition to the greater frequency of contact, companies are engaging with investors on a broader variety of topics. The scale of engagement with investors on executive remuneration has almost doubled since 2014. In addition to board effectiveness and director tenure, which the majority of IROs across Europe touch on in their conversations with investors, our findings show that more than half of European IROs are engaged with investors on board diversity. Following the exponential rise in the number of information security breaches over recent years, a new topic to emerge on the agenda is that of cyber security. Given the significant financial and reputational impact of such events, investor scrutiny of companies’ preparedness for potential breaches is expected to increase going forward.

With rapid technological innovation and regulation-driven changes to corporate access and financial reporting, investor relations has entered a new era of opportunity and challenge. Now it is down to each company to make the best of use the new tools at their disposal and address the challenges they are facing.

About the survey

Citigate Dewe Rogerson first started investigating trends in investor relations in 2009 to gain insight into how companies were adapting to the uncertain times brought about by the 2008 financial crisis. Since then, our annual IR survey has gained a growing number of supporters, not least from IR societies across Europe including the UK IR Society, Germany’s Deutscher Investor Relations Verband (‘DIRK’) and IR Club. This has led to a record number of 193 IROs from Europe’s leading companies participating in this year’s survey to provide the most comprehensive insight to date into changing attitudes and practices from objective-setting, reporting and guidance to analyst coverage, investor and activist engagement to the changing use of technology.

The full report is available on our website at: http://www.citigatedewerogerson.com/wp-content/uploads/2015/07/Citigate-Dewe-Rogerson-Investor-Relations-Survey-2015.pdf

A New Frontier in Financial Technology

This is re-print of a piece that first appeared in Technology Viewpoint in IR Magazine edited by Michael Chojnacki from Closir.

There’s something different about Level39. Europe’s largest financial technology accelerator opened two years ago in the heart of London’s Canary Wharf with the explicit aim of supporting the next generation of technology start­ups. Most of the growing number of entrepreneurs on Level39 left their jobs in the City to try to solve industry problems their employers and competitors had little appetite to address, following the vast reduction in R&D and technology budgets post­ 2008.

Working in small, agile teams and freed from the internal approval process, the next generation are quickly rising to the challenge. This hasn’t escaped the attention of the large banks and sector players, who monitor the market closely, often looking to partner, invest in or buy from the new kids on the block.

Why should we care? Because the technology developed by entrepreneurs in places such as Level39 will play a fundamental role in shaping the IR industry during the next 10 years. It will dictate how shares are traded, cleared and settled. It will influence the composition of shareholder bases. It will govern how we develop and maintain relationships with investors and analysts. It will impact our access to information that helps us to make intelligent strategic decisions. The most relevant areas of innovation can be broadly categorised into six key themes:

  • Fragmentation of Investment Research 
  • Technologies in the Capital Raising process 
  • Data Science and Analytics 
  • Democratisation of Corporate Access 
  • Development of Trading Technologies 
  • Evolution of Marketplaces and Support systems

Today we would like to address the first topic.

Fragmentation of Investment Research

Before setting up Stockviews, Tom Beevers spent nine years as a pan­ European portfolio manager at Newton, a London based investment manager with over $75bn in assets under management. Like many of his colleagues in the industry, he was a heavy consumer of research but became frustrated with the lack of variety of perspective. As a result he often found himself searching through online forums, blogs and social media for other viewpoints. Seeing an opportunity, he founded Stockviews, an online platform that collects equity research from independent analysts (anyone can write research on any stock) and rates each based on the performance of their past stock picks. This is potentially an interesting development for IR teams. It means that existing sell­side analysts may soon have to make room for the growing number of independent analysts whose views are followed and respected by thousands of followers. It certainly wouldn’t harm IR teams to keep the top­performing analysts on their radar and perhaps even engage in periodic dialogue with them. A fresh perspective can be helpful and innovative ideas like Stockviews are a good way for companies and investors to broaden their horizons.

Wisdom of Crowds

The growing trend towards group opinion platforms is testament to belief in the wisdom of crowds. In 2014 researchers from Purdue University, City University of Hong Kong and Georgia Institute of Technology published Wisdom of Crowds: The Value of Stock Opinions Transmitted Through Social Media. The authors analysed approximately 10,000 articles and comments on a popular social media platform for investors called Seeking Alpha. Its ability to predict stock returns and earnings surprises was much higher than expected, supporting the case for independent research. Others platforms which gather research, estimates, or opinions about listed companies include Estimize, SumZero and Value Investors Club.

Influencers of this trend

Another factor sell­side research teams have to contend with is the new wave of regulation governing payment for research and corporate access services. The proposed EU regulations are expected to severely limit the degree to which fund managers can pay for research out of trading commissions, thus resulting in fund managers having to pay for research out of their own P&L. With investors hesitant to pay out of their own pockets it becomes uneconomical for brokers to cover a long tail of mid and small­-cap stocks. Institutional investors are increasingly setting up their own in­-house research teams, further exacerbating the problem.

In light of the inherent conflict of interest in the current model, the key words behind the latest regulations are ‘accountability’ and ‘transparency’. New market players are increasingly utilising social technology as a tool to level the playing field and democratise the research process. But do social finance platforms have a role to play in the professional investor community? This question was posed at last summer’s annual CFA conference in Seattle. The strong consensus was that online crowdsourcing communities can be very useful, particularly to investors with less access to sell­side analyst reports or those looking for a different perspective. If technology driven platforms continue to make the investment process more efficient and inclusive, they will no doubt become a serious challenger to current industry standards.

Drivers of Innovation in Fund Management

research study published last week by London-based think tank Create Research deserves a closer look. Amin Rajan, who is both CEO of Create and an early mentor to Closir, conducted a study into how digitisation, and the intrusion of internet and mobile players, looks set to reshape the asset management industry during the coming months.

Fund managers themselves have been slow to embrace technological innovation, although in the last 12 months a number of global trends have started to help the process along:

  • An exponential growth in number of affluent investors
  • An increasingly tech-savvy population
  • Greater flexibility in pension contributions and longer life expectancy
  • Increasing demand for transparency and synchronisation from regulators
  • Growth of geographically ‘portable’ investment products such as ETFs
  • The popularity of social media channels spilling over into the finance community

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The report outlines the emergence of several new models:

In the evolving marketplace, virtual advisors offer the mass affluent market a streamlined communication process through mobile and digital media, enabling them to take advantage of technology while retaining some of the personal touch.

Online advice platforms, or ‘robo advisors’ as they are being called by some, have already started to offer retail clients the chance to build personalised portfolios using proprietary algorithms.

Fund consolidation portals will help them to aggregate and manage investible funds across multiple platforms.

Given the obvious opportunities these trends present for ambitious and resourceful technology players, it’s unsurprising to hear Google and Apple mentioned as potential disruptors. Create’s report suggests mobile phone providers may also be well positioned to enter the fray.

Although industry players have been losing sleep over the tech giants for some time, there are obvious hurdles for data-sharing social technology companies in an industry which is defined by a strong risk culture, regulatory oversight and the importance of data security.

Strategic partnership with finance players may be a good option for technology and mobile companies, as it offers them a way to mitigate these concerns while making the most of complementary skill sets. There have already been some high-profile collaborations, with Aberdeen Asset Management forming an alliance with Google and Canadian mobile provider Rogers Communications partnering with Canadian bank CIBC.

Change may be gradual in an industry traditionally resistant to technology. Create points to the airline industry as a successful model, where both customers and providers quickly adapted to the increased efficiency offered by technology as concerns over security proved to be exaggerated.

Source: Create Research