Technology Disruption in Asset Management

Written by Tom Secaur | Apr 27, 2015

I recently attended an industry conference with 600 of my closest friends from the Asset Management industry – asset managers of all shapes and sizes were represented with the majority representing either the IT or Operations side of their respective firms. You also had the usual suspects – plenty of vendors and consultants were trolling the conference for varying purposes – I fit into this category. Many of you reading this have been to these types of conferences – sprawling venue with exhibit halls, breakout sessions, industry panels and a bit of fun interspersed over 3-4 days spent with industry colleagues. There is also typically a keynote address or two designed to properly kick-off the proceedings – some of these are better than others, to be candid. A few years ago, it was Carly Fiorina, certainly a formidable speaker with a hugely impressive career. That said, I can't remember a single word from her keynote. It didn't resonate, at least not with me. The keynote this time around was delivered by a gentleman named Salim Ismail. I had never heard of Salim prior to his walking out on stage and delivering his presentation/speech. Unlike Ms. Fiorina's speech, I've been thinking about Mr. Ismail's keynote often over the past several weeks.

The general theme around Salim's speech was disruptive technology and the growth of the "exponential organization". There actually wasn't a lot of talk about asset management (more on that later), and the impact of technology disruptors or innovation on our industry. Frankly, I suspect that is simply due to the notoriously slow adoption of technology (some may call it avoidance) in the greater Financial Services industry. Regardless of Salim's industry focus, what he did speak about was mind-blowing (at least for me), despite the fact that most of what he talked about is happening right before our eyes. Think about the industries that have been completely overhauled and re-architected in the past 20 years due to technology accelerators and innovation – Retail (Amazon), Music (Apple), Entertainment (Netflix), Taxi (Uber), Hotel (Airbnb), Automobiles (Google Car, Tesla), Currency/Payments (Bitcoin, LevelUp, Square), Publishing (Amazon, Apple), Photography (Facebook, Instagram, Snapchat), Fundraising (CrowdRise, Kickstarter), and the list goes on.

You may read the above and say "Google Car"? Really? Well, the Google Self-Driving car has now driven over 1 million miles without an accident. It is 2-3 years away from being available to the general public, and as a result, my 8-year old daughter may never own a drivers license. I think by now most people are aware of Airbnb. But I'm guessing that you don't know that in 2 years, it will be the largest hotel chain in the world; and they don't own any hotels! How about Kickstarter? If you've got a creative idea, Kickstarter is an avenue to craft your idea, build a project, attract investment and not have to engage a VC firm from Silicon Valley. Since 2009, 8.4 million people have pledged more than $1.7 billion (real $$$) to fund over 80,000 projects. I'd be remiss if I didn't mention the all-consuming smartphone growth. I really don't need my wallet anymore – between my Starbucks app, LevelUp, parking and mass transit apps, most days all I need is my iPhone. There most definitely is "an app for that". And while there are currently 9 billion connected devices on the Internet today, that number is expected to hit 1 trillion in 15 years. The information revolution is in its infancy; we are just scratching the surface.

Lately, I've been finding myself having discussions around technology disruptors and accelerators with whomever will entertain my thoughts – clients, colleagues, friends and family are all subject to my dissertations and intrigue. What I certainly do not know is how and when our industry will be affected by true disruption. Our industry, in my opinion, moves at a glacial pace when it comes to technology, and it is ripe for disruption. Asset Management firms still move files from point A to point B in much the same fashion that they did 20 years ago. Data is still managed inefficiently on systems that are not scalable, expensive to maintain and difficult to extract and consume. "New" investment vehicles ranging from ETF's to multi-asset products to OTC derivatives get the shaft when it comes to vendor software designed to properly handle them. Richard Branson has stated that most great ideas come out of frustration; several new businesses have been built by entrepreneurs who saw models that simply didn't make sense. Will Bitcoin transform aspects of our industry? Will we finally get a handle on "Big Data"? Maybe the Robo-Advisor movement will take hold (Wealthfront is intriguing)?

As I stated above, I don't have the answer for what will ultimately be the "inevitable truth" (the death of the current incarnation of our industry, and the emergence of the new). If I did, I would likely be on Kickstarter raising money and developing "an app for that."

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