May 21, 2021 | Matthew M. Caulfield, Executive Vice President, Chief Revenue Officer
We’ve come a long way from the days of printed pitch books, investment roadshows, and static market research. Today, asset managers have immediate access to real-time financial data, technology that can automate daily functions, robust collaboration tools, and even artificial intelligence solutions capable of learning and making predictions.
As technology has fostered innovative new product designs, investor appetite for unique portfolios that meet their individual needs has grown to match. Success today is largely driven by a manager’s speed, agility, and scalability when it comes to delivering customized portfolios to clients. For competitive firms, updating technology and operating models is never over – there’s no choice but to constantly evolve front, middle, and back office capabilities to keep up.
To understand the capabilities needed to win – today and tomorrow – it can be helpful to understand how we got here. Below are the three recent eras of asset management operations and technology:
Era 1: Fintech’s Big Bang
Financial technology has exploded over the past several years. More than 4,600 financial technology firms have been founded since 2008, and some estimate that the total number of companies in the space stands above 5,000 today. Finding the right technology provider became critical for many firms, and success often hinged on the quality of that partnership. To this day, almost 80 percent of financial institutions have entered into some sort of partnership with a technology-based service provider.
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During this era, these tech firms began offering support to asset managers across the board – investment accounting, compliance monitoring, performance measurement, operations, big data, and much more. This vastly increased managers’ speed and agility and opened the door for new offerings.
Era 2: The Product Expansion Age
Powered by new technology introduced during the fintech boom, asset managers made tremendous strides in developing a series of different investment solutions to fit specific needs, including SMAs, UMAs, ETFs, and more. To support these various solutions, the industry relied on a series of siloed technology platforms that enabled advisors to provide more tailored solutions.
Asset managers during this era had been counseled to leverage “best of breed” technologies that support each individual aspect of their business. It worked when looking across functions, but it tempted firms to segregate their business by product line (private wealth, institutional, international, retail SMA, model delivery, multi-discipline, etc.). With so many systems working simultaneously but not in unison, it created an environment that was challenging for advisors to navigate when creating client portfolios.
Along with product expansion, managers moved to outsource middle- and back-office operations during this era. These functions were often siloed as well, and sometimes led to increased cost, confusion, and inefficiency across the firm. These forces created a demand that has come to define our current era in asset management: consolidation.
Era 3: The Great Technology Consolidation
The era of fragmented operations was partially caused by the limitations of specialized products. But technology providers have since evolved and matured, which has prompted the new era of technology consolidation the industry finds itself in today. In addition, as demand for customized products has increased, technology is key to providing the scale to minimize cost, risk and operational burden.
Today, there’s a newfound focus on technology platforms that unify functions, reduce complexity, and enable customization at scale. In the past, customized investing, such as ESG, tax optimization or direct indexing, required significant involvement and oversight, and mainly made sense for large institutions and high net worth individuals, where customization could be applied at the account level. Now, technology makes it possible to create customized experiences with less day-to-day manual upkeep, making them more accessible for individual investors.
The great technology consolidation translates to better, more customized investment solutions for clients and frees up asset managers to spend more time on their strategy. Managers can bring a variety of products to market to meet the needs of an expanded audience, all while having a real-time view into operations. While technology is always evolving, this era offers managers a more comprehensive and flexible solution than they have ever had before.
In a New Era, Partnership Remains Critical
No matter what era comes next, asset managers will need to ensure they partner with a team of professionals responsive to market opportunities and knowledgeable of the asset manager’s operating model and investment process.
Managers are looking to outsource to firms whose teams have knowledge of all product types and the flexibility to meet their clients’ evolving product offerings. Solution providers must have experience, knowledge, and technology supporting a wide range of investment products, not just one or two. When done correctly, asset managers can benefit from powerful operations that expand margins, raise productivity, and address the increasing demand for customized products.
Matthew M. Caulfield
Executive Vice President, Chief Revenue Officer
Matthew M. Caulfield, Executive Vice President, has over 30 years’ experience in the asset servicing industry. His consultative approach has resulted in clients’ ability to realize revenue streams through new product launches and entry into new distribution opportunities, while increasing efficiency and reducing risks and costs. Matt oversees all aspects of client experience, including marketing, sales, solutions, relationship management and client services all geared towards enabling asset managers to achieve their goals through benefit-centered solutions.
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