Fee pressure and shrinking margins are a fact of life for asset managers, so it's natural that reducing costs is a primary goal for firms of all sizes. But evolving global regulations make it harder to achieve this goal. More and tougher regulations require managers to commit additional technology and people to compliance, causing costs to climb.
Asset managers are well aware of the relationship between these goals and challenges. According to Northern Trust's new survey and paper, "Driving Growth in Asset Management," cutting costs is an obvious top priority. Of the 300 asset managers surveyed, 87% said controlling costs is a strategic operational priority for the next two years. At the same time, half noted that the regulatory environment they face is a top challenge for launching new products. Further, 45% are confident they'll spend more time and money on meeting regulations in the next two years than they did in 2019.
So how do asset managers reconcile the desire to reduce costs with growing regulatory expenditures?
Smart technology investment can disrupt the pattern of rising regulatory compliance costs. While technology implementations require upfront investment, asset managers that make the right decisions can benefit from greater cost savings in the long run.
Most managers in our survey understand that technology investment is the key to managing rising regulatory costs: 64% of survey respondents said they plan to leverage new technologies to achieve their goals in the next two years. But to break out of this challenging loop and stay ahead of their competitors, managers will have to identify the right technology strategy for their own operating model, jurisdiction and product mix.