Asset Managers, Performance Measurement, Uncategorized

In the Future, Tech will Separate AM Winners from Losers: Willis Towers Watson

Roger Urwin, global head of investment content at TAI.

The adoption of new technology by asset managers will set them apart as they look to remain competitive and grow in the coming years, according to a research paper released this month by Willis Tower Watson’s Thinking Ahead Institute (TAI), entitled “The asset manager of tomorrow.” The report also predicts that the roles played by CIOs, portfolio managers, analysts and client service providers in the asset management industry will change over the next five to 10 years, and that new, more specialized, roles in the realm of data science will be created.  

Asset managers slow to use technology                                                      

The asset management industry, in general, has been slow to incorporate the use of new technology into its business model, despite the technological revolution that seems to be under way in many other industries, said Roger Urwin, global head of investment content at TAI.

 “It has been a stretch [for the asset management industry] to become more streamlined and more technologically savvy, even though it has been working hard and spending a lot of money on it,” Urwin said. Overall, technology has not been transformational in the investment management industry, save for a few specialized organizations who have used artificial intelligence (AI) and machine learning in the management of their portfolios, he said. In fact, while the use of technology seems to be becoming more prominent in almost every industry, there has been no “Uber moment” coming through in asset management,” Urwin added.

“The jury is out on the degree that conventional asset management agencies digitize successfully or are over-powered by new challenger organizations that have an intuitive edge,”

TAI researchers were surprised to find that while the assembly of data and the processing of knowledge is so central to successful asset management, “investment management organizations and asset managers have not placed themselves higher up in the hierarchy of succeeding with the benefit of technology,” Urwin said. “As far as streamlining the investment process and the client management process, I think asset management should stare at itself and ask if it recognizes how far it has still to travel on technology,” he noted.

A people business

The slow uptick in the adoption of technology is due, in part, to the fact that asset management firms rely heavily on the type of thoughtfulness, analysis and decision making that only humans, so far, have been able to do, TIA researchers also found. “The craft of asset management has been very much human intelligence-based, while the best applications of technology has been by using algorithms, the two haven’t so far found a good blend,” Urwin said.

Technology is most successful when used in situations calling for speed and simplicity. In asset management, decision making and execution is much more complex and slow to emerge, Urwin explained. “Asset management is about dealing with complexity. But the investment industry doesn’t have answers yet for how to make it more simple,” he said. As Urwin sees it, “it’s a challenge the industry will face over the next three to five years. That said, “The jury is out on the degree that conventional asset management agencies digitize successfully or are over-powered by new challenger organizations that have an intuitive edge,” he said. But Urwin still believes that “asset management organizations could be a lot stronger if they used technology as a bigger part of their proposition.”

Data science and AI changing job descriptions

The TAI report also predicts that the roles played by CIOs, portfolio managers, analysts and client service providers in the asset management industry will change over the next five to 10 years. Some jobs will be displaced or lost, while new more specialized ones, such as in the field of data science will continue to be created. “Date science is hugely in demand in asset management,” Urwin said. The problem is that “it’s not easy to secure the best people in data science as they are more attracted to technology companies.” While the asset management industry has typically been successful in acquiring investment talent, finding new talent in data science continues to be a struggle “because the finance industry has been supplanted by the tech titans as the best places to work,” he said.

That’s not to say there will be an overall decline in hiring. Quite the contrary. “The projections that we have from our research base suggest that the total head count in asset management in the next five to ten years is likely going to be a little bit higher than it is right now, but it will be in more specialized roles,” Urwin said.

Some of that growth in the industry will happen on a regional basis. “In the developed markets, AUMs [assets under management] are not growing that fast, but if you look at China you see asset management with double-digit annual growth—that’s where the head count will particularly move up,” according to Urwin. He added that a lot of these new jobs will encompass the use of both artificial intelligence and human intelligence (HI), “which is better than just AI or HI on its own. The combination of the two will be more powerful than the pure human version or machine version,” Urwin declared.

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