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C8 2022 outlook: client demands for customisation and transparency are shaking up the financial services sector

David Jervis, Global Client Officer at C8 Technologies, shares his outlook for 2022, focusing on the increased demand from clients for more customisation and transparency in financial services and the tech advancements making those demands realised.

David Jervis, Global Client Officer, C8 Technologies, comments: “The financial services industry, like many others, faces client demands for scaled customisation and increased transparency. Investors, both institutional and retail, want to be able to buy exactly what they want and receive and control it with transparency. Fortunately, technological advances are enabling this process and direct indexing methodology provides those capabilities.

“The urgency of the climate imperative and the need for investors to rapidly boost their ESG focus also accelerates a shift away from pooled products like Unit Trusts and ETFs towards portfolios that investors design and implement themselves. Definitions of ESG compliance vary hugely, but asset owners and investors do not have the luxury of waiting until they coalesce. They are being held increasingly accountable for expressing their investment impact framework and acting upon it. Pooled or ‘one size fits all’ products, though key components of asset management weaponry today, need to be complemented by the more flexible design approach offered by direct indexing. Investors will want less to give their capital to others to manage, preferring, now that technology allows it, to invest it directly and accurately whilst retaining control over its various return streams and impact.

“Younger generations of investors are at ease with technology, likely to pull away from the status quo almost by default and used to having the power to customise delivered to the device in their hand. This is the democratisation of investing, the disintermediation of its industry, and, arguably, a rebellion against its layered fees and practices. Add to the above, the weight of the climate emergency and you have an explosive shift in behaviour and expectation that is likely to re-shape everything starting, at base, with the very definition of ‘returns’. What good are percentage gains in the value of an investment if that investment provides negative value in the race to create sustainability?

“The speed of change will surprise, as it has in other industries, as technology gains tend to turn decades into years or, perhaps, months. Financial services practitioners have to adapt quickly to allow their asset owner clients to customise exposures directly with full cost transparency or they will be bypassed, in the same way that corporations who are unreactive to ESG expectations, will see funding go to those who are deemed to be doing more good.”

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