Blockchain, Blockchain, Blockchain
Blockchain’s role and potential influence on every facet of financial services continues to be discussed among C-level executives. The distributed ledger technology could revamp regulatory reporting and even remove the necessity to use clearing houses for OTC derivative clearing. This is not before it has disintermediated a host of middle and back office roles across financial institutions. In reality, Blockchain faces a number of stumbling blocks, not least getting the industry to actually agree on harmonised standards and operating models. The proliferation of private Blockchains instead of the public Blockchain is also a challenge that needs to be overcome. Instead of streamlining an already fragmented financial services model, the growth of private Blockchains could actually complicate it further. A move to a public Blockchain is critical if the technology is to live up to its hype.
Online robo-advice has existed since the late 1990s, but it is evolving very quickly. Regulations such as the UK Retail Distribution Review and EU’s Markets in Financial Instruments Directive II (MIFID II) have banned commissions meaning ordinary investors have few avenues to source reliable investment advice. Robo advice may not appeal to institutional investors but could make headway with ordinary retail clients with investable assets. A select few asset managers do have equity stakes in robo-advisory platforms, which proponents argue is a cost-effective and less manual way of facilitating client interactions. It will also appeal to younger investors with a bias towards mobile apps and platforms, many of whom will want instantaneous services delivered in a simple manner.
BrexitThe financial risk of Brexit was an issue for many attendees, with the occasional wry comment about whether the British contingent will be able attain visas for next year’s Fund Forum in Berlin. The risk of Brexit to fund managers should not be underestimated, and any painful divorce with the rest of the EU will require managers to restructure their organisations – most likely out of Luxembourg or Ireland. This will be an unwelcome development given the current fee pressures and pre-existing regulatory costs facing fund managers. In theory, the UK has implemented EU directives meaning equivalence should be assured. However, in practice this looks unlikely as EU policymakers will not want to give generous terms to the UK lest other wavering members opt to exit too thereby heralding the disintegration of the EU. The bulk of financial services firms present in Berlin were generally against Brexit citing the potential disruption to the EU and the global economy.