Four ways in which investing will change drastically over this decade

The Covid pandemic has led to several industries getting disrupted in the way they operate, behave, and even mutate. “Investing” is one of those industries which has seen significant evolution, especially in terms of execution and digitisation.

However, my belief is that this process is going to get exacerbated over the next few years, led by 

1) Technology, 2) Regulation and 3) Digitisation

Let me speak about the areas which could get further disrupted due to the aforementioned factors.

  1. Products

The period between the years 2015 and 2020 saw the emergence of investors being able to invest and trade online, viz., equity shares and mutual funds. Moreover, the account opening processes were offline, and the eventual execution moved online. The shift in this period was somehow sluggish. 

However, post 2020 and the Covid pandemic, we have seen a large move towards digitisation of products and onboarding journeys, whether it’s opening a bank account online, buying international equities, investing in mutual funds/PMS, gold or even fixed deposits. All of these activities, and many more, can be done online end-to-end without a physical presence. 

  1. Costs

Currently, investment management costs (i.e., manufacturing – one charged by the fund manager/ distributor for managing the fund) and distribution – one charged by your bank/ broker for getting the fund to you – are set to reduce because of the following two key factors:

  • Technology: As mentioned above, with the reliance on humans reducing, technology will help offer better quality advice at lower costs for users.
  • As we have seen with mutual funds, regulators are increasingly pushing products and companies to be offered without distribution costs, i.e., in the direct code, which helps DIY (Do it yourself) users avoid additional expenses.
  1. Information

The volume of information is rapidly expanding in tandem with the rapid development of markets and the growing complexity of economies. Data and information have become more accessible now, which reduces the knowledge arbitrage enjoyed by a lot of human advisors and investment managers. This reduction will also lead to declining costs and benefits for users. Analysis of such information gathered also requires expertise, which all investors may not have. 

  1. Advise

Predictive technologies will have a big impact in the coming few years, with basic advice becoming more standardized, incisive, and also timely. This will also significantly reduce vested interests and knowledge limitations and help users have a much broader spectrum of accessible data. The ability to plug in one’s info and leverage data to provide recommendations will eliminate a conversation that would have been traditionally delivered. This is likely to gain interest of young savvy investors looking for a highly personalised data driven service who don’t want to pay the high commission fees. 

There will surely be multiple other ways that one can invest and lend, that will change over the next decade, and most of them will be better for the investor community at large. Covid acted as an accelerator to realise the need for disruptions in the market that could help investors face the challenging period with extreme conviction. Financial advisors have started to rethink their value proposition as data is replacing traditional advisors and the types of services they are offering. Its high time to reach the level of demand for digital access, with 24/7/365 interaction to provide seamless advice in real time with the utmost transparency.

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Views expressed above are the author’s own.