Digitalization in Asset Management: AI, Automation, and Tokenization

Asset management plays a central role in the financial industry - and the technological changes of recent years have left their mark. Whether it is the automation of processes, the better use of available data or the further personalization of investment strategies, technological advancements are creating great opportunities, but the risks must not be ignored either. Three major trend topics are the use of artificial intelligence, increasing automation within asset management and tokenization - together, these three trends already have the potential to revolutionize the industry.

Why is digital transformation in asset management so important?

Increasing customer requirements combined with pressure to reduce costs and growing competition are challenges that financial institutions have to deal with in asset management. The correct assessment and use of the technologies that are currently pushing further and further into the market (in addition to AI, these include big data, cloud computing and blockchain) can therefore provide a decisive cost and competitive advantage.

The rapidly advancing development of artificial intelligence services is also finding its way into asset management. This development can make a major contribution to speeding up or simplifying processes, particularly in the area of analyzing large volumes of data or supporting risk assessment. In addition, the use of AI will enable market forecasts to be made in the future, taking significantly more parameters into account. For private investors, this - in combination with the automation described below - offers additional opportunities through the generation of AI-supported personalized investment strategies. The challenges arising from the use of artificial intelligence, for example with regard to data quality or compliance with regulatory requirements, must be compared with the positive effects and evaluated. These include the time savings that can be achieved or the opportunity to make more precise predictions. It will be important for companies to choose the right path for their own strategy in order to gain the greatest possible advantage from this development.

The ongoing automation of various processes offers companies the opportunity to launch new products on the market. The use of so-called "robo-advisors" is a very good way for small investors in particular to have their portfolios managed automatically. The tools take into account various aspects of the respective investor - risk appetite or investment horizon. At the same time, costs can be kept as low as possible thanks to the standardized processes. The asset management companies behind the tools can thus tap into new customer groups and expand their product portfolio. The high cost efficiency and the often very low minimum investment amounts make it easier for small investors in particular to enter the market and gain access to professional investment methods.

Tokenization - based on blockchain technology - enables the trading of assets that are converted into digital tokens. A token has only a fraction of the value of the original asset, which offers smaller investors in particular new investment opportunities and better access to other markets. In addition, assets such as real estate can be traded more easily via tokenization. Overall, this makes transactions faster and cheaper - mainly due to the fact that trading is mapped directly via a blockchain.

Challenges in Asset Management

In contrast to the immense opportunities arising from this transformation, companies also face significant challenges in the context of digital change:

• Need for employee adaptation: New skill sets for working with new technologies are required, which must be conveyed through training programs.
• Data protection and security: Ensuring the protection of both financial and customer data.
• Technological infrastructure: Especially the successful implementation of tokenization requires a stable infrastructure.
• Regulatory requirements: Innovations must be aligned with existing regulatory frameworks.