How is the funds industry adapting to the latest technological challenges? it could do better, if our latest survey of funds professionals is anything to go by...
Technology is becoming ever more embedded in modern life. If you doubt it, watch the ease with which a child of four can navigate the home screen of a tablet computer. Some educators even question whether it is worth teaching children to write longhand any more, given that so much of their lives will be spent communicating on digital channels.
The funds industry is no different from the rest of modern life in that it is being forced to adapt to a world in which technology both enables and disrupts the status quo. The opportunities are manifold. Technology can streamline and simplify, accelerate and distil. In sum, technology changes things.
But is the funds industry well equipped to manage technology changes? In this survey, we canvassed industry opinion regarding how good the industry is at change management, whether it has the tools required to implement change and where it can realise improvements in this area.
In the survey’s first question, we go to the heart of a dilemma facing the industry. Our survey put it like this: “The fund industry uses today’s technology to automate, streamline and lower the cost of existing processes. Does the industry need to go beyond automation and transform the way it operates to remain relevant in the future?”
The response was overwhelming. A large majority, 90% of respondents, said transformation was required. Only 6% said the industry was doing fine and the remainder said they didn’t know. This finding sets the tone for our research. There is a recognition among informed professionals across the industry that dramatic improvements to operational models are necessary.
Why is such a significant shift required? Because the funds business faces threats. In figure 2, we asked respondents to say which of four factors was the single greatest threat to the funds industry. Naturally, some respondents might have been tempted to pick all four, but, when forced to make a choice, the largest group of them (43%) opted for “rising costs and shrinking margins”. This was more popular than “lack of ability to cater to a new generation of investors” and “the entry of an unexpected player, changing the industry overnight”. Interestingly, the least popular answer was “overregulation”, a result that was perhaps surprising, given that regulation is often presented as a major challenge to fund firms. We speculate that the regulatory frenzy that overcame the industry in the wake of the financial crisis has begun to abate, and fund professionals are now turning their attention to commercial challenges.
But what about the technology itself? We have established that transformation is required, but, in figure 3, we asked our respondents if they believed there was technology available to support the required transformation. Our respondents came out strongly in the affirmative, with 72% saying they thought the right kind of technology was available.
The results of the next question (figure 4) added a further cause for optimism. Another large contingent, 74% this time, said that the right type of technology was affordable. These two findings ought to provide some reassurance to fund companies. The right technology is out there, and it is not prohibitively expensive.
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