There has been a renewed focus from the buy-side on efficiency, and how talent and technology can enable that, according to Ryan Burns, Head of GFS, North America Northern Trust.
“Making investments into the right technology and having optimal talent are going to continue to be how managers can be more efficient,” he said.
In a recent Northern Trust survey, respondents from over 300 asset management firms, globally, shared their thoughts on what the next two years could look like from an efficiency and operational perspective.
Fewer managers today see mergers and acquisitions as the way to achieve their priorities in the coming years, according to a WBR Insights & Northern Trust White Paper titled “Driving growth in asset management: The next chapter”.
Instead, they believe they can achieve their goals by leveraging new technologies and refining and implementing their target operating models, with more than a third (37%) see outsourcing as a key tool.
“Managers can best leverage new technology by being open to change and identifying those change agents within their firms that can help drive those decisions,” Burns said.
There are new technologies, for example, that can make an organization less dependent on manual processes, he said, adding that implementing new technology can be a costly undertaking.
“The focus needs to be on what is core, unique and differentiated,” he said.
He thinks that firms need to break down the constituent parts of their operating model to define what is unique to them.
“They can then look at their processes, their technology and at partners like Northern Trust to solve challenges in their overall model,” he said.
According to the results, firms appear to view data management as the area with the most potential for outsourcing (48%), followed by back office operations (44%) and Trade processing (36%).
Clive Bellows, Head of GFS, EMEA Northern Trust, said that deciding to outsource is not necessarily about what solutions, but how managers are consuming data.
The evolving landscape around cloud technology, and the use of database solutions like Snowflake, are giving managers options that did not exist a few years ago, he said.
“This is going to continue to be a fast-moving area because technology is changing all the time,” he said.
Burns added that the data management solutions that are the most effective are those that can be additive, to enhance and support the existing tools that managers have.
When searching for an outsourcing partner, managers will want to find one with the right fit and cultural alignment, he explained.
In some cases, a manager may outsource a large portion of their daily activity, so they will want to be aligned at a firm level, he added.
“It is a service, not just a technology. Both firms must understand each other’s culture and feel comfortable with each other,” Burns stressed.
The survey revealed that the key areas managers are looking to control costs in the next two years are product rationalization (48%) and automation/technology improvements (47%).
Caroline Higgins, Head of Hong Kong Macau and Taiwan Northern Trust, said that managers will continue to look at how they can automate or streamline to manage costs, risk and client and investor experience.
“Given many segments and market processes are streamlined and automated, more benefit may be obtained by assessing fixed versus variable costs and deciding what functions are key to an organization and which can be better managed by outsourcing or third-party relationships,” she said.
With a strong focus on innovation, more and more financial firms are looking to leverage new technologies to achieve success.
According to the survey results, the majority of respondents (52%) are planning to leverage innovations such as AI, ML and the cloud.
At the same time, there are often unforeseen challenges associated with these types of emerging technologies, ranging from issues related to integration and compatibility right through to security concerns.
Outsourcing again is a strong possibility for many respondents, with 45% expecting to engage a managed data service provider, according to the findings.
Bellows said that the challenge for managers now is “how to stay appraised of new possibilities emerging that will solve problems, that maybe a year ago or two years ago, were potentially problematic”.
