By Luuk Jacobs
By Eva Keogan
By Jonathan Max
By Luuk Jacobs
By Andy Milner
By Rob Carter
Brexit, MiFID II, GDPR, Gender Pay Gap and Diversity are the themes we consider top of mind currently which is why we’ve created the Summer 2018 AlgoMe Industry Pulse Report.
We wanted to get under the skin of some of these key events and burning issues for 2018. In doing so, we revealed some very interesting results and statistics.
Given a choice of 7 cities, Dublin, Paris and Amsterdam are the top three choices for Asset Managers, Fintech and Financial Services employees to relocate to following Brexit. While 54% would not consider moving as a result of Brexit.
When it comes to regulation; we are not surprised to find MiFID II and GDPR will affect over 60% of the roles in the industry.
Positively, 59% believe Gender Pay Gap Reporting will improve the career progression of women.
Please read the report for the full information and do get in touch if you would like to know more about your industry workforce.
Rob Carter, CEO, AlgoMe
By Julia Kirkland
Guest blog from Julia Kirkland, Senior Partner at FSTP
If you don’t know already, which of course you do, the Markets in Financial Instruments Directive (MiFID) is EU legislation which first came into effect in 2007. It was created to regulate firms providing services to their clients which are linked to ‘financial instruments’, these being shares, bonds, units in collective investment schemes and derivatives. In addition, it covers the venues where those ‘financial instruments’ are traded.
Fast forward 10 years or so and we have an updated version – MiFID II. This includes the revised MiFID and a new Markets in Financial Instruments Regulation (MiFIR). January 3, 2018 is the day MiFID II must be implemented across Europe.
Now we’re on the cusp of this deadline, the thorny and sensitive topic of Knowledge and Competence (K&C) is bubbling up as a major concern across the industry. We’ve spoken with numerous firms in both the Asset Management and Wealth Management sectors and they have one thing in common; they’re all grappling with the assessment of competence of information providers.
Who is in scope?
In Asset Management, this may cover a wide range of roles from sales teams, client services, broker servicing staff to Portfolio Managers (the really sensitive aspect of K&C). Managers may struggle with the fact they must tell a Portfolio Manager of 20 years plus who hasn’t got a formal qualification, they need to be assessed as competent and in a very short timeframe too.
In Wealth, the scope may cover desk assistants, team secretaries and portfolio assistants who may all be in direct contact with clients, giving them information about prices, valuations, charges and providing generic market or sector views. Additionally, research teams who might attend meetings with clients to provide market, sector or stock views on a non-advised basis may fall under this too. Most of the firms we are speaking to are including research teams. Most of the above staff members have never been included in formal K&C Schemes before but this has changed.
What happens in 2018?
As it stands, information providers not assessed by January 3 will need to be supervised in their activities and oversight of any client interaction must be in place. If you’re not prepared, January 2018 is fast approaching and maybe it’s time to look outside your company for third party support and assistance.
Our guest blogger Julia Kirkland, is Senior Partner, FSTP
FSTP is a training solution provider with expertise in MiFID II and the company also runs workshops to cover Wealth and Asset Management to meet the ESMA requirements and provides advanced K&C assessments for more seasoned, professional staff.
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By Rob Carter
The UK is a hotbed of fintech activity, and it has not escaped the attention of investors worldwide. so what can we expect in 2018?
Last year, almost £3bn of venture capital found its way in to the UK’s tech sector, a record high and nearly double the figure for 2016. British fintech firms attracted almost four times more funding in 2017 than Germany, and more than France, Ireland and Sweden put together. This year promises to be even bigger, but what are the exciting developments driving those investment flows?
Here’s what to expect in 2018 across five key areas we’ve identified:
One of the most exciting developments to land in the UK financial sector is Open Banking. Under these new rules, which came in to force in January this year, banks must share their customers’ financial data with other FCA-authorised institutions, if customers request them to. This includes bank and credit card transactions and information about spending habits, for example. The aim is to improve competition in the marketplace and ultimately help consumers get a better deal. It should also foster much greater innovation, as new alliances are forged between traditional financial services firms and fintech startups. This is already starting to happen – First Direct has partnered with fintech firm Bud, Barclays is working with Flux, and NatWest has teamed up with FreeAgent. Banks are working hard in-house too: HSBC, for example, has launched a beta app which will allow customers to see all their accounts on one screen, even those from rival providers. Expect more innovation and unlikely partnerships in the banking sector this year.
Wealthtech refers to the specific type of fintech which is used to solve problems and improve user experience in the wealth management and investing world. The definition includes robo-advisers like Nutmeg and Wealthify, as well as micro-investment services and digital brokers. They focus on the under-served mass market of people who would like to invest but only have small savings pots to play with, or who perhaps can’t afford financial advice or wouldn’t be economically viable clients for traditional financial advisers to take on. Robo-advice and micro-investing tools help to democratise investing and make it accessible to a much wider consumer base. Although some of these companies may take time to become profitable, the assets they manage are set to grow rapidly. Deloitte estimates the $2 billion in assets under automated management globally today may grow to as much as $7 trillion by the year 2025.
So strong has been the hype around cryptocurrencies that some listed companies in totally unrelated sectors have linked themselves to the space by changing their names or the focus of their businesses. Just adding the word ‘blockchain’ in somewhere has proven enough to send their share prices soaring (see Long Island Iced Tea Corp, now called Long Blockchain). But there may already be signs that the bubble could burst – highly volatile Bitcoin has fallen a long way from its lofty highs, and there is a regulatory threat from financial watchdogs globally following a crackdown by South Korea. There could be interesting developments to come in cryptocurrencies this year as companies navigate the new landscape.
Regtech refers to the use of technology to help financial services firms better comply with regulation. It’s been dubbed ‘the new fintech’ and it is a fast-growing area. Regtech businesses help other firms to meeting their reporting and compliance obligations, monitor transactions, and manage risk. Firms like Funds-Axis, DueDil, and Silverfinch are part of this growing movement. Deloitte says: “RegTech has a very bright future, with a huge amount of opportunity for those developing this type of technology to automate and enable the world of regulatory assessment and control management, bringing clarity and control to an area of the business that is so incredibly important, but so often cumbersome and time-consuming.” With the Financial Services industry under more regulatory pressure than ever and drowning in legislation, Regtech should be a fascinating area to watch.
When you think of AI, you might think of chatbots being used to replace customer service people, or voice command technology like Amazon Alexa. But the applications of AI in fintech go much further. It can be used to spot suspicious transactions and cybersecurity threats, or predict consumer behaviour and make more accurate predictions based on these insights – for example, whether someone will be a future credit risk. Machine learning can be used to create a customised investment portfolio based on someone’s personal interests and preferences, updating it as their preferences change over time. The possibilities are endless, and who knows how the FS industry could change when AI reaches its full potential?
As always, only time will tell when it comes to forecasting the future but one thing is sure, the UK fintech market is thriving now and will continue do so for a long time.
By Rob Carter
It’s 2017 and technology surrounds us as never before. Asset Managers are investing a lot of time and money to get to grips with both FinTech and the new kid on the block RegTech. At AlgoMe we’re fascinated by the way technology is changing the world of work and skills. We’ve put together some key technology themes which we think will be big this year and what to watch out for too.
Big data analytics
Big data is creating a buzz across the business world and is one of the most important challenges and opportunities facing financial businesses today. IDC, the global market research, analysis and advisory firm, predicts that the big data and business analytics market will grow from $130 billion to $203 billion by 2020. The problem is, firms collect swathes of customer data, but without the tools to mine these so-called ‘data lakes’ correctly, they are not getting analytics they can develop actionable insight from. Done correctly, it’s immensely valuable and more than just analysing customer behaviour – analytics can be used to predict the regulatory and operational risks the firm itself could face. For example, using technology to analyse the root cause of any previous regulatory breaches could prevent the same mistakes from recurring in future. The FCA has acknowledged that it too could use big data analytics to reduce the reporting burden on firms. Last year it launched the Regulatory Sandbox to help firms innovate and this has already produced some interesting results in the world of banking technology. Some companies are launching Data Analytics as a Service for the Asset Management industry and the knock on effect will be a demand for professionals with new skill sets to embrace this new opportunity.
No doubt you’ve probably heard of robo-advice, but there are also other ways that machine learning can be applied in financial services. Possibly the most disruptive of technologies to break into the financial services space, you should expect to hear more about machine learning and robo-advice (with a soupçon of AI thrown in) this year.
Just last month LendingRobot, a specialist online investment-management service or so-called “robo-advisor,” announced its launch of a hedge fund which is administered without human intervention. Silicon Valley has also woken up to the opportunities and companies like Sentient Technologies will be grabbing headlines this year.
P2P platforms and other lenders use algorithms to make lending decisions and predict bad loans. There are also firms which use machine learning to scour social media and news sites for trends to give their clients signals to trade on. The FCA has noted that because machine learning can automatically refine processes in reaction to user input, they could replace some of the complex, high volume tasks firm need to perform to remain compliant.
For now, there’s no need to grab your coat and head for the door; technology hasn’t taken over quite yet! However, understanding how these trends will impact your business area will be essential in the coming months.
Cybersecurity and fraud prevention
With MiFID II a big headline for 2017, the need to adopt new technology to support compliance has never been more apparent. The regulatory burden for Asset Managers can be lightened by RegTech as it can be used effectively to monitor transactions, trades and communication in real time, all the time. By correlating information gathered from different sources, powerful calculation engines can highlight errors, gaps and current trends in financial crime to help firms shore up their defences. With financial institutions a regular target for hi-tech cyber criminals, fighting fire with fire has never been more important. We expect this area to become more central to the industry in the short term.
The Asset Management industry suffers no shortage of data but it is faced with management and automation challenges. Organisations are increasingly looking towards technology in their operating models to simplify administration and, where possible, to reduce the costs associated with fund managers doing things manually. It’s a great way to reduce the pressures on margins and increase overall performance.
In 2017, you can expect to see a lot more companies like CG Asset Management adopt automation. Performance reporting, regulatory reporting, investor communications and fund expense management are key pressure points for companies struggling to move away from the legacy systems they have always used or for those who have bought pick and mix technologies that will not integrate seamlessly.
This is a major investment for an organisation and a positive direction for the wider industry to move towards – it will also mean bringing your teams up to speed with new platforms and technologies very swiftly.