The hyper connected funds ecosystem

Firms working within the hyperconnected environment and end investors will also benefit from increased visibility within it, says Brian Turpin, transformation and automation lead at NatWest Trustee and Depositary Services (TDS).

“You can see the monies from the investor level through the assets in which they are invested, all the way through to performance, so the insights available to our clients and their investors would be greatly enhanced,” he explains. “Fund managers could also distribute to a more targeted pool of investors – and it would allow investors to see more clearly what they are investing in.”

“The ability to be able to present investors with much more insight into what they’re investing in – not just how investments are performing but whether they’re meeting their non-performance objectives – is very important”

Brian Turpin, transformation and automation lead, NatWest Trustee and Depositary Services

This will help fund managers to develop more sophisticated strategies for ESG, for example, tailoring these measures to meet investors’ requirements. “The level of detail you could provide to the end investor would allow fund managers to create more bespoke investment funds,” says Turpin.

“We’ve been looking at how we can evolve as a depositary and working to connect a wider breadth of the ecosystem into our data-led platform.”

Broadbent acknowledges that the hyperconnected funds ecosystem remains a work in progress. “This will evolve over time,” he says. But he expects delay to be caused in part by cultural attitudes that mean some firms will take a more cautious approach to data sharing.

“Everyone has bought into the net benefit for the end consumer, but we’re going through a stage of mindset shift,” he explains. “Historically, participants were more siloed in their mentality. There’s a shift now to being part of a connected system, where participants are sharing data.”

Turpin says that, in some circumstances, regulatory constraints restrict data sharing. A failure to invest in technology may also be a factor. But he agrees that businesses need to be open to increased collaboration. “There are diminishing returns to always looking inward for investment payback,” he says.

Meanwhile, Broadbent acknowledges an instinctive aversion to risk. “Opening up your system and making it easier for customers to move information in and out makes firms nervous,” he says. “But if you remain siloed, customers will leave you for a more connected provider. So there is a risk in joining this interconnected ecosystem, but the bigger risk is to isolate yourself.”

He suggests market participants should consider the lessons that can be learned from the disruption successful fintechs have injected into the financial sector in recent years. “One lesson would be that if you’re first to market with a new way of doing things you get first-mover advantages,” he says.

“The fintechs that are thriving have also prioritised the experience for the customer over the financial performance of the bank or service provider. Their bet is, if we can make things work well for the customer, profitability will follow. That has to be our attitude for the ecosystem: let’s think about the end consumer and what’s in their best interests.”

Turpin believes the hyperconnected funds ecosystem will have a profound impact on the funds industry. “The ability to be able to present investors with much more insight into what they’re investing in – and not just how investments are performing, but whether they are meeting their non-performance objectives – is very important,” he says. “It will help to put greater confidence into the market.”

Broadbent adds: “I think it’s the future. Market ecosystems tend to grow in an exponential way once you acquire critical mass. I think this will be the same as more people start to see the benefits of the system.

“The way in which fund ecosystem participants engage with each other now – all this friction and time, delays and duplication – will all but vanish. This new system will save us time, save us money and will allow us to focus on the work that matters most.”