By Steve Young, Managing Partner at Citisoft.
My unlikely predictions for asset management in 2018
- Blockchain will be more focused on delivery and less on ‘white noise’
It would be a pleasant start to the year if, rather than believing the hype that Distributed Ledger Technology (DLT) is the panacea for every problem that the asset management industry is facing, we had a more realistic debate on where its deployment would be appropriate and genuinely disruptive.
Currently there is too much noise and not enough clarity on this subject. Blockchain is not, and never will be, the answer in isolation. It is an enabler and requires the business idea to be clearly specified in order to bring benefit. There are several areas of the asset management industry where Blockchain is not an appropriate technology on which to build new business models and other areas that may be ripe for transformation through models based on DLT.
2. We will see real cooperation and interoperability
Investment management would benefit greatly if there was more collaboration in the industry, from technology vendors through to asset managers. Every part of the industry could be more cooperative and less defensive; sharing costs, creating utility models and so on.
From the technology perspective, if the buyers and providers had a mind-set of open standards and open APIs, making it easy to integrate systems, everyone would move forward much faster.
3. Regulation will ease off
It would be a joyous season for many if the Earth’s next orbit around the sun were when we finally see the regulators back off and give the industry time to evolve.
The volume of regulation has been a real inhibitor to this critical development, as funds and focus have been diverted to compliance instead of the changing customer profile, new technologies and out-dated operating models.
4. Asset managers will begin to encourage small vendors
The software buying community, including procurement teams, will be more open and supportive of emerging vendors. Such a move would bring innovation and agility to the asset management industry, creating a healthier volume of competitive vendors.
Increasing the size of the vendor community would provide much-needed choice, especially in those market segments where there are only a handful of strong contenders e.g. client reporting. Early signs of a new crop of vendors are emerging, but is the industry ready to support and sponsor the innovators?
5. There will be an influx of new skills from outside the industry
By making it easier for young people to join and progress in the industry, more people could enter asset management from other customer-facing markets to break up the status quo. Much of the current situation stems from a resistance to change among the senior ranks of the industry, a community where there is a dearth of fresh ideas.
In a sense, asset management needs to disrupt itself from within, bringing in new talent with new approaches – perhaps from consumer industries. Ideally these entrants would have no experience of asset management and therefore be untarnished by the weight of history, having a genuine desire the change the user experience for investors.
2018 will, I believe, see an emergence of new talent, but my fear is that the asset management industry, in general, is still in some denial over the need for transformation. Talent will underpin this revolution and it needs to be nurtured.