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Asset Management

Reinventing operations in asset management

September 16, 2019

RESEARCH REPORT

In brief

  • In response to rising disruption, asset managers are reinvigorating their products and processes. But where and how are they investing for the future?
  • Read our survey conducted in conjunction with the Investment Company Institute (ICI) to uncover how asset managers are reinventing their operations.
  • Only by developing a strategy fit for a disrupted world and then creating an operating model to deliver on that strategy, can firms thrive.
  • The goal is to blend profitability with organizational flexibility, which requires targeted change management and a commitment to embrace disruption.

Keeping pace with disruption

The asset management industry is at an inflection point. After a decade of sweeping change driven by pressure on fees and the rise of index investing, it’s now facing a blizzard of disruptive technological breakthroughs and relentlessly advancing regulation.

In response, asset managers are investing in innovation and reinvigorating their products and processes. But what are they investing in for the future? And how and why are they doing so?

Unique snapshot of an industry in transition

To answer these questions, we conducted a joint study with the Investment Company Institute (ICI)—the leading association representing regulated funds globally—that provides a unique insider’s snapshot of investment operations in asset management.

The insights cover the full spectrum of issues facing operations leaders—from improving growth and efficiency to harnessing emerging technologies, from managing legacy technology to optimizing talent, and more.

Our research shows that 42 percent of operations executives surveyed believe their operations and technology are not configured to adequately execute the firm’s overall strategy.

Rising to the challenges

Asset managers’ responses are mainly focused around three areas: strengthening the front office, enhancing client engagement and rethinking their technology and operational support models. Operations leaders have a high degree of responsibility for these initiatives—and an opportunity to be an important partner in bringing their firm’s strategic goals to life.

Our survey reveals that efforts to address all of these issues are underway:

64 %

have completed a major operating model change in the past three years

55 %

report having a formal initiative in place to evaluate the business and operational potential of new technologies

42 %

have a back or middle office system consolidation or conversion initiative underway

55 %

have a data management initiative that aims to enhance data governance and quality

Calling for disruption across the investment life cycle

As operations leaders continue with these programs, they’re simultaneously leading the calls for disruption of many functions across the investment life cycle. Accenture’s Capital Markets Vision 2022 report highlights how industry utilities could play a role in disrupting some key processes—and respondents to our operations study agree. Top candidates for disruption in operations include data management (66 percent), collateral management (22 percent) and clearing and settlement (18 percent).

Respondents accept that disrupting these areas will require cooperation across the ecosystem—between asset managers, service providers, exchanges and more—together with a “capacity for innovation” in operations. This capacity must include an ability to leverage new technology solutions, and a number of leading firms are already experimenting with technologies like artificial intelligence (AI), distributed ledger technology and robotic process automation (RPA).

Findings from our survey include:

70 %

of operations leaders expect AI to deliver the next wave of cost reductions to the industry

52 %

of firms are using RPA in their operations

Transforming talent in operations

With this innovation imperative in mind, asset managers are increasingly recruiting business-focused technology skills. Going forward, different skill sets will be required to drive innovation and protect asset managers from disruption. Zeroing in on changes in the required skill sets, our research confirms that asset managers are aware of the need to transform talent in operations.

75 %

identify investment operations knowledge and problem-solving as the top skills they’re seeking today

65 %

believe data science and technology development skills will be most in demand in five years

A crucial aspect of reinventing operations is people. The human element must evolve—alongside technology—to support the back and middle office.

New strategy, new operations

Overall, our study shows that asset managers are actively disrupting and reinventing their operating models and skill sets to win out in a disrupted future. Their ultimate goal is to blend profitability with organizational flexibility. Those firms who actively embrace disruption will be the best placed to achieve it.

About the research

Sent to members of the ICI Securities Operations Advisory Committee, which is made up of senior operations leaders, the survey sought to understand the current trends, challenges and initiatives in asset managers’ back and middle offices. The survey received responses from 33 asset managers accounting for around $15 trillion in assets under management (AUM) as of December 2018.

Ross Tremblay

Managing Director – Asset Management

Ross specializes in large-scale transformational initiatives in the middle and back offices in the asset management industry.

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