The asset management industry is a data industry, handling information rather than physical goods. It is an industry that is managing $100 trillion in assets. It is an industry that impacts the retirement outcomes and future happiness for every single one of us.
What is the problem with traditional asset management?
In our modern world of real-time information flows and instant action – think Netflix, Prime Now – the asset management industry should be at the vanguard of technological development. It should be hyper-efficient – operating with high levels of automation and transparency.
Many traditional asset managers are not adopting this level of technology.
Asset management is grossly inefficient with some asset managers running billions in assets on spreadsheets. These are working with 20th-century technology, resulting in minimal automation and almost no real-time processes. Investors are generally not given the information they seek, and in fact require to best understand their exposures, in a manner that would allow them to make informed decisions.
The industry also suffers from an egregious alignment of interest problem. It focuses on growing assets to earn more management fees, not on providing better performance for its investors. Investors are resources, not customers.
After climate change, getting asset management right to safeguard the financial future of the many is one of the great challenges of our time.
So, what to do?
Change will not come from the incumbent asset managers. They have the wrong people, processes, and technology. They are also comfortable with the resultant opacity as it helps them retain their existing fee streams. Instead, investors should look beyond those who got us here, to those who will get us there – particularly to those FinTech/InvesTech firms looking to radically shake things up.
There is a real and increasingly urgent demand by investors, both large and small, for better solutions; to be treated like customers rather than sources of fees. Further, the right use of technology can drive massive change. Providers who genuinely offer better solutions at a lower cost are attractive to investors, and money can shift very quickly. Investors can drive the changes they need and want by allocating their assets to the providers who give this to them, without compromising on expected returns.
Call to action
So, how may we enable this change? Which of the emerging InvesTech firms will be unicorns? Who are those courageous venture capital firms looking to create a name for themselves by positively impacting the world in a very big way?
InvesTech is not the typical consumer-based FinTech solution founded by energetic young entrepreneurs. Being successful requires a critical mass of industry knowledge, deep technical solution proficiency, and business model innovation. There are far fewer firms that meet these criteria.
But if we get it right . . .
Reach out to Noviscient at firstname.lastname@example.org if you would like to join the conversation on enabling the change that investors need.