Complexity calls more technology: asset managers

FWR Staff

1 March 2007

Regulatory demands, product innovation spurs increased technology spending. Already heavily reliant on technology to keep their keeps their businesses running in an increasingly complex and competitive environment, asset managers are planning to spend even more on operations- and practice-related equipment and services through the coming year.

Last year, technology expenditures accounted for around 13.6% of asset-management firm expenses -- an average outlay of about $11,900 per employee, according to a survey by the Investment Adviser Association , a Washington, D.C.-based association of registered investment advisories and SEI , an Oaks, Pa.-based investment processing and operations provider. Nearly two thirds of the firms polled said they plan to increase technology spending in 2007 in a bid to streamline operational efficiencies.

Differentiation

"Asset managers realize that operating systems aren't simply productivity tools, but a source of competitive advantage," says the IAA's executive director David Tittsworth. "They are key enablers of business success, providing the means to improve investment performance, build relationships with clients, and expand the range of products offered."

Spending is on the rise as managers scramble to keep up with new legal, regulatory, and compliance requirements in addition to increasingly stringent accounting and reporting procedures. The move from pooled investment complexes to more personalized investment products for well-to-do private clients such as unified managed accounts and multiple-discipline accounts call for many managers -- the IAA and SEI survey says 40% of them -- to have two or more distinct operational systems on the go.

Paul Schaeffer, head of strategy and innovation for SEI's Investment Manager Services division, says that operations infrastructure and technology generally are becoming "key levers for competitiveness" through product innovation, improved cost control and the ability to provide "differentiated" client experiences. "Companies in other industries have already shown how to win by competing on capabilities," adds Schaeffer. "Now asset-management firms need to think about applying this principle to their business as the back office becomes a driver of front-office functionality." -FWR