Michael Spellacy, a New York-based senior managing director for capital markets and global leader of asset management at professional services firm Accenture, said the “vast majority of asset managers are under assault on the cost side of their ledger.”
As such, Mr. Spellacy expects that three technologies will drive the best cost advantage for asset managers in 2020:
- The strategic use of cloud technology and replacement or modernization of aging in-house investment platforms.
- The deliberate use of artificial intelligence technologies to drive cost advantages in customer servicing and investment processes.
- The advanced use of outsourcing and shared services in middle-office functions.
In April, The Bank of New York Mellon Corp., New York, announced it was partnering with BlackRock Inc., New York, to deliver integrated data, technology and asset management servicing capabilities to the firms’ common clients.
Through the move, BNY Mellon will integrate its data insights, accounting and asset servicing tools into BlackRock’s investment and operating platform for investment managers, called Aladdin, a news release said.
Allen Cohen, digital officer for BNY Mellon Asset Servicing, said the partnership allows for greater efficiency within firms, such as helping those in front-office roles, like portfolio managers using Aladdin, to get information from other parts of the business more quickly.
“From a portfolio manager perspective, having access to things like available cash, from half a day to a day sooner, allows you to make stronger decisions around your investment portfolio,” Mr. Cohen, who is based in New York, said.
He, too, has seen a trend of asset managers looking to reduce their overall costs. And one of the ways firms are doing this is by finding innovative ways to manage data, which is growing in complexity and volume, yet needed to run their business, Mr. Cohen said.
Chicago-based money manager Nuveen LLC is exploring how it can use data to “find where (business) opportunities are and know much more about clients before we even walk into the door,” said Margo L. Cook, president of the firm’s global client organization, Nuveen Advisory Services.
While Ms. Cook expects the effort to be “more deeply used in the wealth space,” it will also be relevant for its institutional business, as those clients also want to know that money managers “know who they are before you walk into (a) meeting.”
In 2018, Nuveen, which had more than $1 trillion in assets under management as of Sept. 30, implemented a new customer relationship management system to better bring together and clean data that allows it to get a better understanding of clients, Ms. Cook said.
With the new CRM system, the firm can look at a range of issues of importance to clients, from their thoughts about certain alternative asset classes to capital markets forecasts.
“We are trying to ensure that we gather all of that information together and approach the client more holistically,” she said.
As money managers continue to evolve to better integrate technology into their business, demand for professionals with this expertise also grows.
And while firms are moving to lower-fee investment products and facing increased operational costs, the “best technologists and data analytics (professionals) continue to be expensive,” said Alan Johnson, managing director of Johnson Associates Inc., New York.
Despite this, moving into 2020, pay for asset management staff, on average, is expected to look similar to 2019, “down slightly,” according to Mr. Johnson.
Year-end incentives, which include cash bonuses and equity awards, for asset management professionals were projected to be flat to down 5% compared to year-end 2018, a November report by Johnson Associates said.
“I think (compensation declines) probably would be worse, but firms continue to look at their headcount to make sure they don’t have too many people,” Mr. Johnson said of pay projections heading into 2020.
