Asset managers — both publicly traded and privately held — are expected to spend more on technology to automate trading and investment operations in 2006, the second year after the Sarbanes-Oxley Act was implemented, according to a report from TowerGroup. But exactly how much they spend and what they spend it on will vary widely, according to Peter Delano, senior analyst at TowerGroup and author of the report.
"There is not one technology solution that you can plug in," he said in a telephone interview. "You can't say ‘this is the Swiss Army knife for Sarbanes-Oxley.' "
Technology outsourcing is likely to increase, with existing applications "ripe" for replacement and overall technology maintenance costs growing as a percentage of overall spending, he said. In addition, investment managers will need comprehensive monitoring programs to ensure their vendors have effective internal controls.
The good news for money managers is that while Sarbanes-Oxley will increase compliance costs, it will reduce operational costs.
"The successful outcome of Sarbanes-Oxley for money managers is to take what they're doing and use that activity to improve their business," Mr. Delano said. "If you look at an asset management firm's culture, where maybe there hasn't been a strong technology focus in the past, but all of a sudden when the CEO and CFO need to put their signature on a document that says they have appropriate controls, that pushes technology more to the front. Technology can help them feel a little more comfortable with what they're certifying."