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Money Management

Casey Quirk: More managers investing in distribution technology

Money managers are investing in distribution technology following client requests for customization, said new research from Casey Quirk, a business of Deloitte Consulting.

According to the consultant, 40% of firms surveyed in 2018 expect distribution technology to be a priority, vs. only 14% in each of the previous three years.

"Investors, be they institutional or individuals, want more personalized advice, custom solutions and proactive communications from their fund managers, and industry firms are finally mobilizing to meet the challenge," said Jeffrey A. Levi, a principal at Casey Quirk, in a news release announcing the research.

The money management industry spent $2.2 billion on distribution technology functions alone in 2017, according to the firm's research. While the average firm budgets roughly 6.5% of its total distribution expense on the technology supporting this function, the managers spending the most are budgeting nearly 11%.

Managers spending the least use 5% or less of their distribution budgets on such technology, Casey Quirk said in the news release.

Mr. Levi added: "Strong investment performance is crucial but no longer sufficient to stand out from the competition and respond to the increased investor demands for customization. In virtually every investment category over various time periods, more than 25 firms are producing top-decile and benchmark-beating performance, and that's often not enough to be considered for hire."

Successful asset managers must invest in a database to gather, organize and centralize client data from disparate sources; an analytics engine that uncovers unique client preferences; and applications that provide services and real-time information to clients across different investor segments globally to compete.

While the top third of asset managers are spending more than $50 million per year on distribution technology, the median spenders are in the $5 million to $30 million range. The budget for the lowest third of those investing in distribution technology is less than $1 million a year, on average, according to Casey Quirk.

In addition, more managers are recruiting from outside the asset management industry, seeking experts in areas such as digital marketing and data science.