Investment Company Digitalization. How Transaction Platforms Revolutionise Investment Fund Distribution
A study conducted by McKinsey has revealed that merely 4% of affluent clients in Western Europe opt for traditional, offline investment management channels, while a staggering 96% prefer digital or hybrid methods. This trend underscores the shift towards modern, digital financial solutions, particularly in the realm of Digital fund distribution.
Understanding and analyzing this trend is paramount for financial institutions aiming to maintain competitiveness in today's dynamic market environment. Read on to delve deeper into this subject.
Investment Fund Distribution Across the Online Channel
Investment fund companies are currently facing myriad challenges, including lengthy purchase processes and limited access to professional financial consulting services. In the era of digital transformation, these challenges become starting points for developing innovative solutions.
Protracted Purchase Processes
The challenge Transaction processes are often time-consuming, which leads to potential investors dropping out.
The solution Digitalization by way of process automation, which greatly reduces transaction time, eliminating delays.
An example A self-service platform instantly confirms purchases, and offers 24/7 access to the user’s investment portfolio, enabling investors to quickly respond to shifting market conditions. Electronic signatures reduce the time required and the amount of paper documentation.
Limited access to financial consulting
The challenge Inadequate access to professional consulting may hinder investment, especially for less experienced investors.
The solution Self-service platforms offer interactive educational tools, providing clients with the information and support they need, and encouraging them to continue investing.
An example An educational dashboard is a self-service platform tool that offers investors access to an online community where they can share their experiences, ask questions and receive advice from other investors. Chatbots offer additional educational support – these virtual assistants quickly respond to questions, give basic advice and help you understand complex financial concepts.
Financial Barriers in Society
The challenge A less wealthy society and limited financial resources are a barrier for many potential investors.
The solution Digital investment platforms offer easier access to various financial instruments, eliminating the need to possess significant funds to take the first step.
An example A crowdfunding-based micro-investment platform that allows multiple users, including those who are less wealthy, to invest token amounts of money. This model does away with the barriers, offering access to the investment world to a wider audience, increasing the accessibility of digital investments.
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As many as 32% of respondents in Poland list the fear of incurring losses as one of the main factors discouraging them from investing. Source: McKinsey & Company report ‘The State of the Polish Investment Fund Market and Potential Avenues for Further Development’ (Stan polskiego rynku funduszy inwestycyjnych oraz potencjalne kierunki jego dalszego rozwoju) |
Cross-system Integration
The challenge Ineffective integration with existing systems can limit the functionality of your investment platform and impede the flow of data between various infrastructure elements.
The solution Designing and implementing effective programming interfaces (APIs) results in seamless integration with various systems, accelerates data transfer and facilitates platform operation.
An example A proper API integrates your service with an identity verification system, ensuring secure investor authentication. In addition, integration with a communication platform (an SMS gateway, for example) ensure effective contact with clients, as you can quickly provide them with important information. Thanks to these integrations, your platform becomes a more comprehensive tool that guarantees seamlessness and increases investment effectiveness.
No Personalised Offerings
The challenge Traditional sales methods often lack personalized offerings, which can diminish the effectiveness of marketing and upselling campaigns, thereby limiting their potential.
The solution Self-service platforms enable a more personalized approach tailored to the needs and goals of your clients, enhancing the attractiveness of your offerings.
An example By leveraging data analysis, a self-service platform can automatically adjust investment recommendations to match the investor's current needs. Upon identifying interest in a specific market sector or specific risk preferences, the platform can suggest a personalized investment portfolio. This enhances the appeal of recommendations, delivering offerings that align more closely with the client's investment requirements.
Data Security Concerns
The challenge The risk of data breaches is one of the primary concerns for investors utilizing online services.
The solution Modern technologies compliant with legal requirements guarantee a high level of cybersecurity, enhancing investor confidence and safeguarding their assets.
An example An investment platform can be supported by advanced encryption technologies, including AES-256 algorithms and two-factor authentication. This effectively protects clients from cyberattacks and builds trust in online services.
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After a comprehensive digital marketing and distribution system overhaul, a top institution selling investment products in Northern Europe tripled its annual client acquisition rate over three years. Source: McKinsey & Company report ‘The State of the Polish Investment Fund Market and Potential Avenues for Further Development’ (Stan polskiego rynku funduszy inwestycyjnych oraz potencjalne kierunki jego dalszego rozwoju) |
Benefits of Digitizing Investment Fund Distribution
Introducing innovative digital solutions into your investment fund distribution model presents a variety of growth opportunities to enhance competitiveness. Digitization not only assists investment companies in adjusting to evolving client expectations, but also enables them to realize numerous operational, financial, and strategic advantages, leading to enhanced effectiveness and user satisfaction.
These benefits include:
Boosting competitiveness in the financial market
Introducing innovative digital solutions into your investment fund distribution model enhances your company’s competitiveness by meeting client expectations for speed, personalization, and online accessibility.
Operational and cost savings
Automating processes and implementing self-service platforms generate operational and cost savings for investment companies by reducing transaction times, minimizing errors, and facilitating upselling, ultimately driving profits. Although developing your platform is a significant project, it is an investment that yields comprehensive returns.
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The platform operated by NN Investment Partners TFI (now part of Goldman Sachs Group) helped to increase the company’s total sales by 153% over a 12 month period-on-period. Source: McKinsey & Company report ‘The State of the Polish Investment Fund Market and Potential Avenues for Further Development’ (Stan polskiego rynku funduszy inwestycyjnych oraz potencjalne kierunki jego dalszego rozwoju) |
Improved Investor Experience and Loyalty
Modern digital solutions, including interactive portfolio management tools, enhance the investor experience by allowing users to easily track their investments. Personalized services and 24/7 access contribute to increased investor loyalty.
Flexibility in Responding to Regulatory Changes
Digitization enables quick adaptation to regulatory changes, minimizing the risk of non-compliance and ensuring operational flexibility.
The primary benefit of developing your platform is diversifying your sales channels. This strategic investment doesn't eliminate distributors; rather, it allows you to reach a broader audience and expand your potential client base, enabling you to devise more personalized sales strategies. Additionally, profits from sales via your channel enhance profitability, as they do not incur commission fees for external recommendations.
Benefits of Digitising Investment Fund Distribution
Modern Investment Fund Sales with e-point
NN Investment Partners TFI, now part of Goldman Sachs Group, is one of the leading investment companies in Poland. The company was faced with a series of challenges involving a successful digital transformation and ensuring a comprehensive and modern experience for its clients. The main challenges faced by the company were:
- adapting to shifting client expectations;
- ensuring compliance with strict industry regulations;
- ensuring investment mobility and security.
In response to these needs, we completed three innovative projects for NN Investment Partners TFI. The goal was to ensure a cohesive and intuitive purchase path for investors. The projects involved a corporate platform, an onboarding system, and the ability to freely invest in funds.
Discover the potential of digital solutions in investment fund distribution
Digitizing investment fund distribution opens up new pathways for development in the investment fund industry. This transformation reshapes the relationship between financial institutions and clients, ushering in new standards of operational effectiveness and data security. In light of the increasing demand for innovative digital solutions, investment companies must prioritize flexibility, security, and a personalized approach to meet investor expectations and maintain competitiveness in a dynamic market environment.