How Smartphones Will Disrupt The Asset Management Industry
"All this technology is making people anti-social" he complained. "It's turning our children into potatoes".
He meant "couch potatoes" of course, but English wasn’t his first language. This was a grumble about the modern world. He believed that things were better back then because people had time to chat.
A lot of people would agree with Thomas who is now well into his eighties. He’s my regular, but informal companion on the bus.
He had a point. It's difficult to argue with anyone that technology addiction isn't real. But is this true?
Look at the photo below.
Is this evidence of an anti-social past? Of course not! This was just a way of life back then. People read the broadsheets on the way to work to keep informed.
All we’ve done is replace newspapers, telegrams, letter writing, payphones, maps and transistor radios with a single piece of technology – the smartphone.
It represents change that is now an integral part of life.
Taxis, films, books, pizza, plumbers and baby-sitters can all be summoned with a tap of a screen. There’s now instant access to e-commerce, which has empowered the consumer and humbled the traditional retail giants.
This single piece of technology – the smartphone – has for good or worse, completely restructured the global economy. And, it’s going to do the same to the asset management industry too.
Take a look at the chart below. Smartphones are a huge part of our lives now.
Why this matters in asset management
Asset managers look after $93.8 trillion of investments worldwide (Willis Towers Watson, 2018). They do this for pension funds, family offices, foundations, endowments, sovereign wealth funds and even for ordinary people through the mutual funds they offer.
You may have never heard of them, but the chances are that they’re managing your future wealth. Your work-based pension for instance is likely being looked after by some of them. Their success could determine how well off you will be when you retire, if you retire.
Soon with a single swipe you will be fully informed about this. You will be able to take control and make decisions on your pension pot. Asset managers will therefore have a lot to lose and gain when you pick up your smartphone.
How the rule book is already changing
Wining new business from investors is a lot tougher than it once was in asset management. Costs are rising and fees are falling. There have been huge outflows from high-margin traditional active management into lower cost exchange-traded funds.
But, this is not the end game for asset management, like some people think.
There is an ever-shrinking edge in asset management, which appears to come from digital marketing. All of this is thanks to our smartphone usage.
Of course, I can only speak from my own experience as an investment writer.
It took me a while, but I soon realised the mistake I was making in my job. I wasn’t really writing for investors. I was writing to please portfolio managers, plus the rank and file of senior management.
Well, it’s not a bad strategy if you want to keep your job, but it’s not exactly personally rewarding.
So, I started writing on LinkedIn in my spare time because I wanted to hear what normal people thought about what I wrote.
That’s the beauty of social media. The feedback is instant and brutal.
It turns out I wasn’t very good at my job. I had failed to reach the people that mattered most – investors.
No one likes social media in asset management because it leaves you vulnerable to criticism. Yet it's also very powerful.
If you get 20,000 views of a video you posted of yourself that’s 20,000 conversations you have just had with potential investors in little under a day. No sales team, no matter how large, can achieve this.
I’ve been creating this kind of content on social media for the last three years and I now have a bigger active follower base than many asset managers themselves.
That's because in social media, people listen to people, and not companies. Every portfolio manager needs to realise this and do what I'm doing.
The most valuable lessons I learnt was through data.
I learnt quickly what works and what doesn’t. Rather than preaching about the virtues of storytelling, I found out how to do it properly. I applied marketing guru Simon Sinek’s theory on “start with why” in real life and found it didn't work – that was until I tweaked the formula.
The biggest shock for me though was that 70% of my content – articles, posts, charts, infographics and video – is viewed on smartphones. It’s consumed typically, when people are commuting in the mornings or evenings.
This experience was like a gateway to another world. I never imagined the smartphone could be so important to my career.
I found that people do like reading long format articles on smartphones: they are just fussy about what they invest their time in reading. The idea that concentration spans are shrinking because of smartphones is also rubbish – the standards are just higher for good content and people are fussy.
People also don’t like watching perfectly filmed cinematic videos of portfolio manager interviews either. These are boring and it's not difficult to understand why. If your tired and on the train, you don't want to whip out your phone and watch a boring video of a guy wearing a suit. You actually get far more interest if you do a light-hearted video of yourself riding around on an electric garbage truck, manufactured by a company you have invested in.
Do you see where this is going? The smartphone has a huge influence on our lives and also corporate profitability. It’s the gateway to the world for many ordinary people, including those that invest.
Sad as it may seem, it's the first thing we look at in the morning and perhaps the last thing at night.
If the traditional asset management industry doesn’t adapt to this change, then the fintechs will and so will the mega-techs like Google and Amazon. These guys are masters of data and execution. They’ve built fortunes on smartphone technology already.
I believe the smartphone is going to disrupt the asset management industry in a big way. This has been my personal experience. But I'm not quite sure traditional asset managers are ready for this disruption. Perhaps because they haven't noticed.
James Eagle is a freelance investment writer and a capital raiser. Get in touch by email: email@example.com