It’s January, and the asset management has naturally been looking forward with thoughts on what the year will bring.
A couple of bits of news have caught my eye this month, firstly a FT interview with Joseph Sullivan, chief executive of Legg Mason. The big three topics in the article were disruption, profit margins and the industry's scramble to unlock the potential of new technology to both improve investment performance and to trim costs by automating “back office” processes.
This was followed by Deloitte releasing a very interesting report looking at the future role technology may play in asset management. In this, the authors said “One area ripe for transformation is the asset servicing function, where some firms may have siloed business processes being performed across antiquated technologies as the result of prior acquisitions, custom-built systems, and poor integration”.
Interesting stuff, and also interesting how much times have changed. If you look back to the aftermath of the financial crisis, disruption and technology were probably not on many chief executives Top 3 list. The squeeze on profit margins certainly was, with a lot of attention given to the pressure cooker on fees and costs, along with the tsunami of regulation the industry had to swim through. And while the industry has emerged leaner and fitter, with increased efficiencies and reduced cost bases, there has been growing recognition that a strategy of incremental change will not be enough for future success.
In July last year, we at Temenos Multifonds released a survey showing the asset management industry was at a turning point and throwing off the shackles of post-2008. We saw the dawn of a new era, powered by asset managers embracing a digital future, and driving forward an acceleration in product development, digital channels and operational efficiency.
So will 2018 be a year of technology revolution? We certainly think so, and are already seeing it in our US business with three new clients going live on our investment accounting platform in recent months, all looking to technology to not only increase efficiencies and drive down costs, but also open up opportunities for future growth.
In the FT article, Mr. Sullivan’s conclusion is: “Investing in technology is now fundamental, and will materially impact every pillar of the business.” We agree - viva la revolution.