Asset management and the upside of disruption 2.0.
The exponential pull of innovation
"You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete."
– R. Buckminster Fuller
Asset management firms are built to withstand revolutions, not embrace them. The objective, after all, is to preserve and grow capital. Despite its staid reputation, the investment business is not static, with regulatory changes and competitive pressures periodically spurring change. Now, the introduction of new technologies and business models is making change a constant and causing the industry to be reorganized, re-engineered, and reinvented before our very eyes.
Successfully harnessing technology in a complex and heavily regulated industry is not easy, even when there is great enthusiasm for it. Generous budgets at incumbent firms can be undermined by cultures that prioritize stability over creativity. Insurgents, often the innovators, can be hobbled by inexperience with how the investment business really works. Like most revolutions, the transformation of financial services is inevitably turning out to be a messy affair.
It isn’t clear who will survive or emerge victorious, but the basic contours of change are coming into focus. Data plays a central role and is being analyzed with increasingly sophisticated tools that include various types of artificial intelligence. If other sectors are any indication, the already pivotal role of platforms is set to expand even further. Social media is causing communications to be remade and reconsidered. Even the gig economy is nibbling at the edges of an industry that, for all of its corporate behemoths, has always been open to scrappy startups.
We addressed these topics in 2016 with The Upside of Disruption: Why the Future of Asset Management Depends on Innovation. The themes remain relevant, but a flood of venture capital and widespread adoption of new technologies in the intervening years — compounded by the unexpected arrival of COVID-19 — accelerated the pace of change. The net result is a vastly more complex ecosystem populated by thousands of firms at all stages of development. Progress has not been linear. For every genuine innovation, there are countervailing examples of fraudulent or poorly conceived technologies, reminding us to stay skeptical and temper our expectations.
To capture a balanced and up-to-date picture of innovation in asset management, SEI collaborated with ANZU Research to revisit the five ongoing developments that are redrawing the industry’s competitive environment.
Released serially over the upcoming months, each of the following themes — dubbed as follows — will be explored in detail, with a particular focus on recent developments:
The Investment Manager Services division is an internal business unit of SEI Investments Company. This information is provided for education purposes only and is not intended to provide legal or investment advice. SEI does not claim responsibility for the accuracy or reliability of the data provided. Information provided by SEI Global Services, Inc.
Information provided by SEI Investments Distribution Co.; SEI Institutional Transfer Agent, Inc; SEI Private Trust Company, a federally chartered limited purpose savings association; SEI Trust Company; SEI Investments Global Fund Services; SEI Global Services, Inc.; SEI Investments—Global Fund Services Limited; SEI Investments—Depositary & Custodial Services (Ireland) Limited; and SEI Investments Global (Cayman) Limited, which are wholly owned subsidiaries of SEI Investments Company.
Our deep domain knowledge enables us to deliver comprehensive solutions.