By Thomas McHugh, CEO and Co-founder, FINBOURNE Technology
The traditional asset management industry is standing on a precipice, facing immense pressure from all sides. Small and medium-sized investment houses, juggling both equity and fixed-income portfolios, are especially feeling the heat. As retail investors continue to flock to passive investment giants, and institutional investors demand greater customisation at ever-lower fees, many traditional players find themselves struggling to keep up. It’s a battle for survival, and the truth is, this crisis has been looming for years. The cost squeeze that asset managers are now experiencing has reached breaking point.
At the heart of the problem lies a plethora of inefficient processes that have, until now, been tolerated. Research by Coalition Greenwich reveals that outdated systems for managing and sharing data — including manual processing — are costing asset managers millions of dollars each year. One example is the daily grind of trade reconciliation. Each trading day, custodians send data packages to asset managers, outlining the value of assets held on behalf of their clients. These figures need to be reconciled with the fund manager’s own internal records, which include any intra-day trades taking place through brokers. If discrepancies arise, such as trades that haven’t been processed or mismatched valuations, a small army of people is needed to track down the issues and resolve them. It’s a tedious, time-consuming, and frankly immensely costly affair that the industry can no longer afford to absorb.
This archaic approach is just one example of where traditional asset managers can haemorrhage resources. As with many of the operational challenges faced by asset managers, the solution lies in creating a reliable, accurate, and timely source of truth for data that can effectively underpin a fully automated process. Rather than wasting valuable time sifting through data to find exceptions and errors, asset managers can fully automate workflows. This provides real-time trade monitoring, comprehensive audit trails, and configurable alerts which maintain trade integrity. The copious time saved from this automation can then be redirected towards higher-value activities. From conducting deeper market analysis and making more informed decisions to optimise portfolio performance, to spending quality time with clients to understand their needs — think of all that could be done with the additional headspace.
Asset managers have no choice but to adapt. While automating processes is an essential step, it’s about more than just replacing manual tasks with technology. The future lies in fostering a culture of continuous improvement, built on an operating system that connects the past with the future. Such a system should allow firms to be data-driven, using automation, machine learning, and AI to enhance decision-making. Building this foundational infrastructure and mindset is not just a cost-saving measure — it’s the key to remaining competitive in today’s passive-dominant market. Without it, asset managers risk becoming relics of the past, unable to keep pace with an industry that demands adaptability and forward-thinking solutions.
