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Investment Companies 2021 Outlook

There’s no doubt that 2020 has been a year like none other, marked by world events that have brought about pivotal changes at every level. Eric Johnson, DFIN’s president of Global Investment Companies has identified the five themes that will have the greatest impact on regulatory and compliance within the FinTech industry in the year ahead. 

The dawn of a new investor experience is here  

The FinTech industry will need to harness the power of technology to improve the user experience. This is being driven by factors ranging from legal statutes like the ADA/AODA that mandate more accessible investment materials to the growing expectations of a new generation of investors.

More than ever, companies will be evaluating the type of content sent to investors as well as how they receive it. Is the content engaging and intuitive? We believe that existing technology will be more widely adopted to create interactive and immersive experiences, such as educational links into the user interface and adding audio commentary from portfolio managers.

The new generation of investors have come to expect a high level of personalized digital interaction across all aspects of their lives, in the platforms they use to shop, travel and play. Investment companies must meet these standards to provide a richer, more modern experience and anticipate their needs. According to the Los Angeles Business Journal, FinTech and investing apps are reporting a rise in user activity among young investors amid the market volatility during the Covid-19 pandemic.

Giving investors the right content, when they want it, and in the channels they prefer, can turn compliance obligations and disclosure checklists into a meaningful value proposition.

The SEC will continue to drive the move toward modernization

The SEC rules 30e-3 and 498A will come into full effect in 2021 and impact the design, delivery and content that insurance and fund companies must provide to advisors and participants. The SEC has also proposed new Tailored Shareholder Reports, designed to modernize disclosure frameworks and provide clear, concise shareholder reports.

SEC rulings like these have helped move the FinTech industry from documents to data and we expect this trend to continue in 2021. We believe these changes are beneficial to the end investor as well as the industry overall. Firms that are partnering with a solutions provider that has expertise in handling regulatory changes will adapt more quickly to new rulings because they are prepared and have systems already in place.

The back office will be more front of mind than ever

The financial industry is always under pressure to reduce costs and improve overall margins. An ongoing area of focus has been back-office efficiency. The work from home environment has highlighted the role technology can play in allowing employees to work from anywhere. But it has also shed light on how labor intensive some processes can be.

To address diminishing returns on labor, we believe that firms will leverage digitalization and process automation. This can not only drive down costs – it can reduce the risk of errors that occurs in manual data input. Digitalization will improve back office efficiency and increase ROI, as employees spend less time compiling reports and more time on analysis and strategic thinking.

Covid-19 has initiated a new digital era

The global pandemic and the work from home environment has created a new normal, which has sped up technology adoption by asset management companies. We saw that firms that were further along on their digital journey were better prepared when the lockdown hit.

In the year ahead, we’ll see companies that were in the consideration phase of technology systems accelerating their decisions. They will be examining and evaluating strategies, workflow and cost efficiencies as well as their organizational culture to support a digital transformation. We believe these factors, along with regulatory changes, will have significant impact in 2021.

Digitalization will accelerate globalization

Whether it is responding to a major health crisis, ensuring compliance with new regulatory requirements or meeting investor expectations, the industry as a whole has had to make digitalization a priority.

This response will have lasting impact. Once a firm changes their internal workflows, going from manual processes to automation, their internal efficiencies are optimized. This also sets them up for success in engaging with external constituents, including potential investors and third-party providers as well as regulators on a global scale.

Making this digital shift is more important than ever and the time to make it is now. Companies that are leveraging technology and partnering with industry experts are creating their own point of differentiation in the marketplace. They are also in a better position to meet the ever-changing economic, regulatory, and investor demands as we move into 2021.