Investment Operations

ASSET MANAGERS EMBRACE A TECHNOLOGY ARMS RACE

ChatGPT Artificial Intelligence for Corporate Actions

More than three-quarters (79%) of asset managers have increased their budget dedicated to distribution technology in the past year

Advisors have become fully immersed in digital interactions throughout the pandemic and expect asset managers to be armed with the more relevant data, in real time. In response, asset managers are ramping up distribution technology efforts to strengthen advisor interactions and generate an advantage over competitors, according to The Cerulli Report—U.S. Intermediary Distribution 2022: Redefining Value in Distribution.

Throughout 2021 and the first half of 2022, large technology improvement initiatives have emerged at unprecedented rates. This is due, in large part, to stem outflows resulting from adverse market conditions. “In recent years, any negative impact asset managers felt from outflows was largely offset by asset appreciation in a bull market,” states Andrew Blake, senior analyst. “Firms with less effective distribution strategies struggled to pinpoint systematic issues as assets grew. Now, those lagging in their digital capabilities may face substantial roadblocks trying to catch up to technology-savvy competitors launching new tools,” he adds.

Amid a cultural shift in the mediums through which business is conducted, asset managers have amplified spending for digital initiatives. Over the past year, 79% of firms increased their budget dedicated to distribution technology, and 11% of firms increased their budget by more than 25%. “The new landscape is one where technology stands to be the leading source of scale, advisor engagement, and employee recruitment. In some cases, distribution-related technology has become a better competitive advantage than product performance,” says Blake. According to the research, for the next three years, nearly two-thirds (63%) of distribution executives consider the expansion of digital marketing capabilities to be a top priority.

With an eye toward the future, firms are re-envisioning their modern distribution strategy and how to get the best of human capital while maximizing areas like data management and demand generation. While they are embracing digital enhancements, getting the people and processes in unison to maximize the capabilities of new tools remains a challenge. When analyzing pros and cons of upgrading technology, distribution executives cite inadequate internal resources as a key challenge, with 60% reporting it as a roadblock. “Asset managers need to be cautious of getting too far ahead onto a new technology before the people, processes, and systems are in place,” remarks Blake.

Creating a culture where sales teams trust that technology and data are not threats, but rather enhancements, to the status quo is a necessary step for successful adoption. Implementing new technology without the culture to embrace it reduces ROI. “Ultimately, the depth of digital resources a distribution team can offer generates technology alpha, and successful deployment of tools can meaningfully aid sales efforts,” concludes Blake.