When Will the Technology Giants Move Into Asset Management?

Written by Jonathan Clark | May 6, 2015

I recently saw the findings of a survey concerning the likelihood of the big IT firms moving into asset management. The theme of the research is whether such a move would disrupt what has been a traditionally quite slow-moving industry.

The conclusion of the study (by CREATE Research) was that the IT giants would not take a leading position in the asset management industry. One of the key reasons given for them not doing so was that consumers would not be willing to place their investments in the hands of firms that do not have the same kind of risk culture as the asset managers. Cybercrime was another factor cited, the fear of which would prevent consumers from moving toward the large IT players (essentially due to the very public security failures of the likes of Google, Microsoft and Sony).

Personally, I would have thought that the rise of cybercrime would play into the hands of large IT firms. They would have a far greater IT capability than any asset management firm – and vast, deep pockets. The greatest concern, however, would be the protection of data. Revelations by whistleblower Edward Snowden showed agreed privacy practices were being ignored by some of the major IT corporations. There have been calls for the current Safe Harbour deal, which allows the transfer of data to US firms, to be scrapped. The European Court of Justice is expected to give its verdict in June – a verdict that could have wide implications for all US firms dealing with Europeans' data, including the likes of Twitter, Google, Microsoft and Yahoo.

The research suggests that transformation will be led from within the industry, as opposed to a Google-like technology giant disrupting the incumbents' business model. The study concludes that 'asset managers will be in the driving seat because risk management is in their DNA'.

I think a move from a technology firm into the retail area is more likely. Once they are established in retail, they may then move into the mass affluent space and on up the ladder, but I can't see them ever taking over the institutional space.

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