The next section of our survey examined technology. The funds sector relies on technology across all parts of the business, but, unfortunately, much of this consists of “legacy” systems that were devised or implemented years or even decades ago.
We asked respondents if they thought legacy technology was a challenge for the funds industry and the answer was a clear “yes”. A total of 84% of respondents said legacy technology was a problem (of which 40% held the view strongly: see figure 7). This finding underlines the importance of future investment in technology: the old systems are due an upgrade.
Which types of technology are most blighted by legacy problems? Again, we got a clear result – the back office. More than half (54%) said back-office technology was most affected by legacy challenges (see figure 8). This finding, perhaps, is not a surprise. The back office has for years been seen as the humdrum, “unsexy” part of the funds business and it is only relatively recently that senior executives have taken an interest in it.
The answers shown in figure 8 suggest that investment in back-office technology should be a priority for fund companies. But, given the regulatory challenges identified earlier, it is safe to assume that many firms will struggle to find the time and energy for this process, despite recognising its importance.
From the 20th century, we move to the 21st. Out of a list of emerging technologies, which would have the biggest impact on the funds industry? Our respondents gave a clear lead to distributed ledger technology, otherwise known as blockchain, which 44% of them opted for (see figure 9).
Those who voted have clearly absorbed some of the excitement in industry circles about this technology, made famous by Bitcoin and other cryptocurrencies. Decentralised registers have the potential to revolutionise many aspects of financial services. Fund companies from across the industry are right to watch developments in blockchain to see how it will affect their businesses.
Artificial intelligence was chosen by 22% of respondents, ahead of robo-advisers and regulation technology. Respondents who answered “other” were asked to say which type of technology they had in mind; answers included “new dealing and settlement systems and APIs [application programming interfaces]” and “big data”.
Data and all
The next few questions were repeated from 2017’s collaborative survey between Funds Global Asia and Calastone, ‘Distribution state-of-the-nation’. As in last year’s poll, we asked respondents if they thought asset managers were good at making use of data about their distribution supply chain. A total of 51% of respondents said they disagreed with the statement (of which 9% said they disagreed strongly: see figure 10). The result was slightly stronger than in last year’s survey, when a total of 48% said they disagreed with the statement. Although this is not a large rise, the finding prompts us to speculate whether asset managers have become worse at using data in the period (which seems unlikely) or, on the other hand, whether there is a growing recognition about asset managers’ shortcomings.
Next was another repeated question, this time asking respondents to identify the main issues that asset managers face in understanding end-investor data (see figure 11; respondents could pick more than one answer to this question).
“Lack of access to data” came out on top for the second year running, with a slightly larger proportion of responses than last time.
“Lack of appropriate technology” came second with 49%, compared with 40% last year, a result that may indicate a growing awareness that legacy issues are hindering fund companies from making the most of their data resources. This year, 23% of respondents said there was “too much data”, compared with 17% who said the same last year.
Another repeated question asked if, based on their track records for technology implementation, asset managers were good at adopting new technology. A total of 39% disagreed with the statement (of which 5% disagreed strongly: see figure 12).
This was a decrease compared with last year, when a total of 44% said the same.
The 41% who disagreed with the statement were asked to say why they thought asset managers were not good at adopting new technology (see page 26 for an edited list of the responses). Several comments were left. “Asset managers are typically averse to increased costs where the outcome is not certain,” said one. “They are good at buying new things but bad at making use of technical capabilities,” said another. A third noted: “The competitive environment restricts collaboration […] therefore the ability to achieve standardisation against an ever-moving technology landscape is almost impossible.”
One punchy respondent remarked: “It’s because you have a bunch of old people at the C-levels of asset management who have allergic reactions to the thought of change or evolution.”
Given the accusation that asset managers are technically inept, we felt it was prudent to ask if parts of the funds industry are at risk of disruption.
Nearly half (46%) of respondents said administration was the part of the funds business most likely to be disrupted, compared with 40% who said distribution and 12% who said manufacturing (see figure 13). This finding is another indication that the back office will be a focus of technological change in the years ahead.
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