2018 is nearing its end. It has in many ways again been an exhausting year for the Investment Management industry. It started with the delivery of MiFID II, followed by other regulatory requirements like Gender Pay Gap Reporting and GDPR as well as preparing for the next round of regulation that will hit in 2019.
I however think that 2019 is going to be the year of the B word.
Likely this will be most associated with BREXIT – and the lack of plan B. I don’t want this blog to become another discussion of it as it is all in the hands of UK parliament as to where this all will go. If as a company you have not done your risk assessment in respect of this, and mitigated the risk already with changes to your business set up (how small or large this might be), time is, or has, run out by now and you can only hope for a low impact outcome.
There are however other B words that I believe will put their mark on 2019.
BLOCKCHAIN (or should we start calling it Distributed Ledger Technology). Much has been spoken about it but relatively little has been used in the investment management industry so far. The term at least has now become a collective understanding of the technology with targeted solutions becoming available although the blockchain technology offerings remain nascent and immature. Equally research from Forrester anticipates 90% of blockchain pilots won’t become complete products or services. Despite all these challenges blockchain will remain on the agenda of many Boards and Executives, as you can’t afford not to understand what it will change to and in your industry in general and the benefits it could bring to your own company.
This brings us on to BITCOIN, one of the best-known uses of blockchain. 2018 was literally a year of highs and lows for Crypto Currencies in general. If you believe specialists in the field, 2019 will see the entry of Institutional money entering crypto currency. The Nasdaq will launch cryptocurrencies in 2019 and various other trading platforms are preparing their launch (Cyprus, Gibraltar).
It is said that Bitcoin, as indicator for the crypto market, “is and remains in its long-term bull market. Bitcoin trades in its “transition band” whereas going forward, as Bitcoin is maturing as an investment, it will not exceed its bullish band” (investingHaven, October 2018).
Bringing us to BOX and more specific sandbox; the technology and software testing environment that enables the isolated execution of software or programs for independent evaluation, monitoring or testing. This is becoming standard practice in business, and even the FCA, to test ideas to resolve the challenges that are being faced without directly making choices. It is bringing us all back to the days when we were at kindergarten playing in the sandbox, being creative, free spirited and thinking, leading to creating better together. 2019 will see sandbox being applied more broadly beyond technology.
The last B word will be the BANK OF ENGLAND and its regulatory arm the PRA and FCA. Various regulation will need to be implemented in 2019, most notably and far reaching the Senior Manager Certification Regime (“SMCR”) and the Asset Management Market Study (“AMMS”). Both will not just be a challenge for the investment management industry to comply with but equally will change culture and governance on an unprecedented scale.