Attitudes & Latitudes: Notes from the Tech Side of Investment Management

Attitudes & Latitudes: Notes from the Tech Side of Investment Management

The investment management industry is known, from the outside, for many things. In a few words: high stakes and important work, high-performing individuals, and long but rewarding hours. When it comes to tech, however, the IM space is conservative, and does not tend to be an early adopter of the new technologies which surround it. Please note: this is a loose generalization based on the interactions we’ve had with a great many asset managers. We’ve noticed something we find quite interesting.

I’ve been involved with FinTech for the last few years, witnessing businesses large and small experience the IoT revolution in different ways. Working for a bank’s technology arm out west, I was witness to many digital disruptions in several verticals. Now I’m in the big city with the bright lights, and more asset management firms than I can count. As a “millennial” who reads the paper version of the WSJ every morning and has enough salt in his pepper (hair reference) to be disqualified from this generational hype altogether, I’ve pondered the parallels of this industry to others I’ve worked in. Turns out, the digital needs of IM are more present than ever and I’ve noticed a very similar trend. Thus, like a good millennial, I’ve highlighted these in a blog for all the world to read.

A little backstory: DiligenceVault, as a SaaS company in the IM space since 2014, has gotten to see the industry from an important perspective. DiligenceVault was founded to bridge the gap between diligence needs and diligence processes. Our platform accomplishes this and streamlines processes through the use of digitization, artificial intelligence (AI) and machine learning algorithms. But as the need becomes ever more clear, is the industry itself ready to implement?

Asset management is a virtual business, but operates within a relatively low-tech infrastructure. By 2020, technology will have become mission-critical to drive customer engagement, data mining for information on clients and potential clients, operational efficiency, and regulatory and tax reporting. -PwC

As a leading-edge technology company, we know these things because we see these needs yet witness the stickiness of the status quo. We’re in a unique position as we cater to both the asset managers and allocators.

We have created an eco-system with both parties utilizing the different modules of the platform in various ways. To elaborate, some of the users are on the Vault because their clients are Vaulters. Thus, by default we get the opportunity to help on-board and assist with the adoption process for users of very different motivations.

Interesting observations of the industry have come from this and from our outreach efforts. One seemingly popular angle includes a very “we’ve always done it this way” mentality, which neglects to entertain the full capabilities of a certain technology. This mentality, while not all wrong, creates pressure on employees to perform tasks manually when technology is a far superior solution in most cases. In large enterprise organizations, this mindset also causes fascinating workarounds and technology patch-overs built out by incredibly talented engineering teams (some of whom will eventually leave the team and start their own SaaS company. Sound familiar?) What’s more, a recent McKinsey study notes, “many firms have tried to manage complexity by expanding and patching their legacy platforms, leaving them with processes, governance, and skills that bear higher long-term costs and are not optimized for growth in a digital era.” This aspect of our industry is backwards!

But, it isn’t all doom and gloom. We also see something else.

Through the thousands of users on the Vault, and the thousands more we’ve connected with about the platform, we’ve noticed an interesting phenomenon among a portion of our users. These firms have a different attitude altogether when it comes to technology. They own a tech-first mentality and often lean towards the solutions presented in this digital era. These are the ones who are connected closely to the various service providers of the industry, they are competitive, dare I say prideful, of the technology they’ve adopted, and they benefit greatly. Just look at the data concerning effective client on-boarding:

These cultural differences have been understood within our firm because, as a high-tech service provider, we pick up on it quite quickly. If a firm is naturally inclined towards technological advances, we know it from the first conversation. Firms like this understand budget, implementation, and adoption procedures. They have aligned their expectations with reality and fully comprehend the implications of a new technology.

But we’ve been wondering: Is this difference as vast as we perceive? This question is important because as small and close knit as the industry feels sometimes, is there really such a fundamental difference of attitude towards technology? And is success contingent on this attitude? Hint: the data suggests a strong affirmative here.

Where your company falls in these two camps could have implications for the future of your organization. In recent survey findings, “The correlation between digital leadership and improved overall performance is no accident: McKinsey’s view is that to succeed, asset managers must be digital leaders.”

So, what does it all mean? (If your firm needs to up its ante on digital leadership, take notes here).

According to the aforementioned study, there are three attributes of these companies:

  • First, they have eliminated the traditional wall between business and IT, including but not limited to combining their budgets.
  • Second, these firms are simultaneously eliminating costs from legacy systems while investing in next-gen technology solutions.
  • Third, they have moved their technology capabilities to the center of their strategic initiatives.

As a technology firm in the space, I would also add a prerequisite to this list: an overall urgency to get rid of institutional complacency, tech and otherwise, is paramount.

Unstick the status quo.
Be agile.

A managerial initiative to arm your firm with the ability to thrive in this digital age will bring great success in the long run. The data strongly suggests that as technology increases (which it will), the firms who adopt it will prevail in this revolution. The digital leaders in the IM industry will become the industry leaders of the IM space.
Is your firm ready?

Reach out today for a DiligenceVault demo and learn how we can help you become a digital leader.

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