Many firms in the investment management industry need to strategically change their technology infrastructures. In so doing, they will have to stop dealing with today’s problems and look at tomorrow’s opportunities.
At the moment, much of the industry’s attention is on short-term regulatory issues, particularly in Europe. Something seismic has to occur in the market to make things change. I think that when a new global player arrives on the scene, things may change dramatically. Such an arrival would bring new ideas, new technologies and potentially new customers to the markets.
Another factor is that, in times of change, it is much easier to be a new entrant than an incumbent. The cost of the speed of change is incredibly high, and it’s harder for the incumbents to remain competitive.
If a major newcomer is going to drive new customers into the market, it will almost certainly occur within the mass affluent sector. For instance, a firm like Google could quite conceivably enter the asset management market, but will only do so if it sees a real opportunity. If such a firm came to market, it would arrive with a completely different business model from everybody else. That would lead to major changes in the practice and that could be a good thing for the end-investor.
Technology giants are interested in the investment management market because there would be a clear opportunity for them to apply their technology with a new customer base. As their technology develops, for instance around ‘intelligent search’ (i.e. being able to better analyse our needs), their potential grows.
My belief is that the investment management industry is in need of abit of positive turmoil. At the moment the big firms appear to be fairly static, without focusing on where they want to be or where they want to go. The incumbents need to get their heads out of the sand, look around and apply more foresight.
Otherwise it’s a situation that is ripe for the taking.