By Terry Flynn, Managing Director – Asset Management and Insurance, Fenergo
Asset managers are at a critical juncture. Following years of fee compression and ever-increasing competition, they face heightened regulatory scrutiny, pressure to expand into new asset classes such as private markets and investors’ clamoring for frictionless, digital engagement. Changes call for new strategies and approaches, and while the asset management sector has been exploring avenues to meet both investor and regulatory demands, a prominent blind spot lies in its traditional and outdated paper-filled, Excel-based and manual processes. However, as 2025 progresses, outdated processes will fade, and firms leaning into digital transformation will ultimately lead the industry.
The regulatory landscape is ever-changing
To set the scene, regulators have made their intent to increase oversight in the asset management sector known. The US Securities and Exchange Commission (SEC) 2025 exam priorities suggest that asset managers may be kept on their toes – from a strict look at the practices around fiduciary duties, AI, private funds, anti-money laundering (AML), and more; 2025 may be the year of intense scrutiny. Likewise, effective March 12, 2025, the expanded reporting requirements of Form PF will further challenge asset managers and compliance teams, demanding additional time and resources to meet these obligations.
Not to be outdone, the Financial Crimes Enforcement Network (FinCEN) finalized new rules for the industry,, mandating significant updates to firms’ AML/CFT programs. These updates require a risk-based and reasonably designed approach to align US standards more closely with international AML regulations. It will be very challenging, if not impossible, for firms to comply with these new rules utilizing manual processes, based on spreadsheets and static reports. Automated, digital solutions will be the rule not the exception going forward. Firms that continue to try to manage this process manually will see increases in operational costs, while leaving them vulnerable to the regulatory and reputational risk of suspicious activity falling through the manual cracks.
While each looming regulatory shift may have its nuances, there is a key underlying necessity to meet them: accurate, real-time data, feeding reporting and analytics is at the center of compliance processes. The call for digitization to ease compliance burdens, enhance operational efficiency and provide better investor experience can no longer be neglected. Automating reporting can significantly improve accuracy, streamline operations, and help firms effectively manage and keep pace with evolving regulatory requirements and expectations.
Old habits die hard, but die they must
According to a recent Accenture survey, 95% of asset managers believe “technology, data, and digital capabilities will be differentiators in 2025.” Yet, 72% admit that they “do not view themselves as leading firms when assessing their digital maturity.” This highlights a significant gap between where the industry knows it needs to be and its preparedness to reach that goal.
The sector is hindered by manual processes and fragmented, siloed data sets, leaving significant potential growth opportunities untapped. Without adopting digital-led tools and solutions, managers face challenges in establishing a reliable single source of truth for data and will find it difficult to access the real-time insights they need. Furthermore, with inconsistent data, a manager looking to onboard a new asset class or strategy will likely fall into quicksand. Every attempt to move forward will be challenging as they are met with incomplete workflows, error-prone processes, and limited visibility. These inefficiencies not only burden managers but also spark investor dissatisfaction as the client experience is subpar, marred by delays, duplicative requests and an overall lack of transparency.
Enhancing data management and implementing better tactics to the client lifecycle
Automation is a game-changer; however, firms must ensure their data is in tip-top shape before jumping into and reaping the benefits of this technology. Asset managers maintain huge, but often disparate, data sets which means that checking and aligning data into a single source of truth cannot happen overnight. It takes time, coordination, and a strategic approach to ensure that all data stored is accurate and valid and that the data lives in a central repository. Data governance measures must also be implemented to ensure proper data control, quality, privacy, and compliance. Once this is created, firms are better positioned to leverage automation and other digital-first solutions, such as generative AI.
The benefits of automation can be vast. For example, cross-selling can be a challenge without reliable, well-organized data, but having a robust data infrastructure enables seamless cross-selling opportunities. Plus, leveraging predictive analytics can provide managers with insights to deliver more personalized approaches – a requisite that investors increasingly seek.
Automation can be a strong ally for compliance teams within financial institutions, creating a proactive rather than reactive environment. Teams can use solutions that automate the transaction monitoring process and transform the AML process. Automated systems can flag real-time suspicious activities and generate alerts according to specific thresholds, allowing compliance teams to focus on other areas and ensuring no mistakes occur.
First impressions matter
Unfortunately, onboarding inefficiencies have deep roots that significantly impact organizations. In the Global KYC Trends in 2024 Asset Management report, 74% of surveyed firms have reported losing an investor due to poor onboarding experiences. This number is too large to be ignored, especially when automation can support an effective onboarding process. When diving into the data, the top grievances uncovered included repeated documentation requests (40%), complex processes (38%), and onboarding delays (36%). For investors, first impressions leave lasting thoughts, and given that the asset management sector is about building and fostering relationships, one poor investor experience can impact a firm’s ability to grow, as word of mouth can be a powerful method in shaping perceptions.
Meeting diversification needs requires more than just the basics
Diversification across asset classes is at the top of investors’ agendas. As a result, asset managers who want to succeed need to oblige or they will fall short of client expectations. However, this brings about an onslaught of new considerations. From reporting on a broader range of investment and fund structures to more detailed data gathering, and stricter oversight of investment and counterparty exposure to name a few.
The current protocols asset managers deal with are ineffective. Manuel’s inefficiencies limit managers and, in many cases, will be a bottleneck in collecting, analyzing, and providing the required data to make informed decisions.
In line with a greater demand for diversification, many investors are looking for investments to expand across borders, specifically for a global approach to achieve optimal returns and cushion against any regional market volatility. To keep up, asset management firms need to harness the power of digital transformation to seamlessly traverse the onboarding demands of new and frequently complex jurisdictions. By integrating automated Know Your Customer (KYC) solutions, firms can efficiently conduct comprehensive risk and compliance checks and robust risk assessments, allowing for reliable and accurate decisions. Utilizing predictive analysis and machine learning for diversification strategies can provide asset managers with advanced insights further mitigating potential risks.
Is AI and KYC a match made in heaven?
KYC processes can significantly benefit from AI implementation. Not only does it offer better fraud detection measures, enhanced due diligence, and streamlined onboarding, but it also provides scalability. Firms can take in large quantities of data without burdening the compliance teams. Moreover, the ability to offer better illicit finance detection allows teams to use their time for more strategic and personalized investor relations insights, cross-selling, and beyond.
It’s important to note that using AI and machine learning technology effectively requires proper implementation and high-quality data. Taking it a step further, while AI regulations have not yet been enacted, that does not mean they aren’t around the corner. With that in mind, when implementing AI, understanding the regulatory risks and ensuring you are thinking ahead of potential reporting measures is paramount.
The need for change is here and those who adapt are primed for success
The push for transformation is here, and managers that harness the power of automation will be miles ahead of the pack. By embracing automation, streamlining processes and centralizing data, firms can enhance the investor experience, reduce costs and stay ahead of regulatory demands. Not only does this have the potential to help with profitability but it leads to an enhanced and potentially personalized experience for the investors – a win-win.
