Enabling digital AMCs through platformisation

Ujjwal Jain | Updated on June 14, 2021

Platformisation in the financial services space can unlock immense value. It will preclude the need for large infrastructure and distribution costs, thereby shortening the time to launch and manage a digital AMC

When you think of a platform, you will inevitably think of Amazon. Indeed, e-commerce in general, and Amazon in particular, effectively leveraged platform play to create an interconnected ecosystem of providers and consumers of goods. What any consumer wants is low-cost access to a range of products that can cater to her every need.

Correspondingly, what a service or product provider wants is a low-cost way to achieve scale by making its product available to a wide range of consumers. Platformisation is the bridge that effectively meets the requirements of both providers and consumers.

Inarguably, platformisation in the financial services space can unlock immense value. Imagine an ecosystem where as an investor you are not constrained by the range of products that institutions offer and can actually access uniquely crafted investment products that are better capable of meeting your nuanced needs. Or, as a licensed investment manager you can focus on creating products while the platform ensures that you can reach scores of investors. Or, as a broker, you can leverage the investment and research expertise of other independent investment advisors who can make their products available to your customers.

Platform as a Service (PaaS) or platformisation has now made all this, and more, a reality. Simply put, it will preclude the need for large infrastructure and distribution costs, thereby shortening the time to launch and manage a digital AMC. Particularly, tech-based AMCs that are looking to launch smart beta passive products should plan to proactively leverage the PaaS play.

Who gains and how?

The benefits of platformisation accrue to all stakeholders within the ecosystem. Further, as the financial services and investment management industries embrace platformisation, its impact is only going to amplify.

Investment providers are able to unbundle their service offerings and make them available to the customers in a seamless manner. Brokers, advisors and AMCs can leverage platform play for all their service offerings, ranging from ideation and research to distribution and execution. The good thing is that this can be done in an efficient and cost-effective manner without the investment provider having to build the necessary infrastructure, technology or distribution network.

Inevitably, this will lead to product-side innovation as providers can easily source the relevant data and focus on research. Platformisation creates an opportunity to build digital AMCs where innovative products can be distributed on a large scale through a plug and play model. There really is no longer any need to establish an AMC the old way for building investment products for investors. The new way, enabled by platformisation, is quicker, more transparent, and completely seamless. Further, the necessary checks can be established to ensure adherence to regulatory frameworks. This is a very important aspect of operating in the financial services space.

For customers, this opens a world of opportunities. They now have seamless access to a range of investment solutions that are available at a single click on top of broking. Thus, they no longer need to compromise in terms of investment choice. Access to a range of investments created by different providers means that they can invest in solutions that meet their unique requirements.

More importantly, retail investors can now gain access to investment products that have previously been reserved for a select section of investors.

Platformisation is fast changing the investment landscape. It elevates the entire ecosystem, ensures transparency and greater access, and enables financial inclusion. With PaaS, a broker can seamlessly create innovative investment products and distribute it at scale to retail customers or a top fund manager can easily create curated portfolios and make them available to the larger investor community, acting as a Neo AMC.

Platformisation can unlock endless possibilities and push the envelope of capital markets. Inevitably, we are likely to see more and more new age technology focussed AMCs and investment providers embrace this route to product innovation and distribution. Overall, the benefits of platform play can be value accretive not just for the financial services community but also for the country. Those who do not embrace it now risk being left behind to gather dust.

The writer is CEO & Founder, WealthDesk

Published on June 14, 2021

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