• AI (Artificial Intelligence) and investment platforms can help asset managers drive distribution and create a product advantage
Asset managers must readily embrace disruptive technologies to transform their operating models if they want to execute front-office strategies to pursue new revenue streams and meet evolving client expectations, according to a new report from Accenture based on a study performed jointly with the Investment Company Institute (ICI).
The report “Reinventing Operations in Asset Management” is based on an ICI survey of 33 U.S. asset managers who account for nearly US$15 trillion in assets under management. It notes that operations executives are aggressively transforming their operating models to achieve greater agility and cost effectiveness as they take on the challenges of supporting more complex products and services. In fact, nearly two-thirds (64%) of firms surveyed for the report have completed a major operating model change in the past three years to improve operating efficiencies.
However, the survey found that more than four in 10 asset managers (42%) believe that their operations and technology are not positioned to enable their firm’s overall strategy. The report suggests that asset managers need to do more to contend with a plethora of industry challenges, including the rise of passive investments, fee compression, and the decoupling of assets under management (AUM) and revenue growth.
“The decoupling of AUM and revenue growth is the most pressing issue facing the industry, and it will require asset managers to fundamentally bend their cost curves and accelerate the pace of their operating model transformations,” said Michael Spellacy, a senior managing director at Accenture who leads its Capital Markets practice globally. “It’s not just about creating cost efficiencies; asset managers need to alter their strategies at the front-end to focus on driving distribution and creating differentiated products. Doing this effectively requires embracing technology and innovation, including investment platform technology and AI, for better investment decision-making.”
The report notes that the discovery and adoption of emerging technologies will be critical to helping asset managers support complex investments like derivatives and alternatives; improve the quality and accessibility of their investment data; and address the limits of legacy technology across the investment life cycle. Yet only slightly more than half (55%) of asset managers have a formal initiative in place to evaluate the business and operational potential of new technologies.
Overall, the majority of asset managers have embraced — and seen positive results from —artificial intelligence (AI) and robotic process automation (RPA). More than two-thirds (70%) of operations executives expect AI to deliver the next wave of cost reductions to the industry. Further, half (52%) of operations executives currently use RPA in their operations, with four in five (82%) of those saying it has delivered the expected results.
Interestingly, few asset managers in the study identified distributed ledger technology (DLT) as a top technology initiative despite its many potential capital markets applications, with respondents indicating that DLT and smart contracts are among the least mature technology initiatives in the industry. However, respondents appear to be taking a wait-and-see stance, as many believe that DLT could improve transaction and collateral management, derivatives processing, reconciliations and data management.
“The time for asset managers to begin to radically transform their operations areas is now. Doing so will ensure the business is well positioned to capitalize on technology innovations as they mature,” said Mike Kerrigan, who leads Accenture’s Asset Management practice. “As industry challenges and speculation around when the current bull market will end persists, those who lead operations functions need to rethink how their operations and technology can better serve the front office while helping to improve the client experience and engagement.”
• The full report can be accessed here : https://www.accenture.com/us-en/insights/capital-markets/asset-management-reinventing-operations
