U.S. money managers will face greater pressures to invest in technology to enhance client service capabilities and uncover potential savings as the cost of doing business rises in the industry, sources say.
In the year ahead, firms can also expect institutions to push harder for transparency into fees and ESG products.
For money managers, implementing tech-driven efficiencies throughout the business will contribute to a competitive edge in the current landscape, said Taimur Hyat, chief operating officer at PGIM Inc., Newark, N.J.
"I think we will end up with a very long tail of firms that don't have the scale, ability to invest in technology and the global reach," leaving them with "little prospects for growth," Mr. Hyat said.
The use of automation to simplify and bring the down the cost of middle-office and back-office functions is where Mr. Hyat sees technology having the biggest impact on money managers.
Another impact will be "the transition of client servicing and marketing to digital marketing within the institutional sales and marketing world," he added.
"Institutional clients now expect simplicity (and) ease of access to portfolio information," mirroring the digital experience of retail investors, Mr. Hyat said.
John Delaney, senior director, investments, at Willis Towers Watson PLC, said the continued downward pressures on fees and the need for asset managers to be more efficient has led many firms to invest in technology.
The asset management business is "still very much an industry that runs on Microsoft Excel," Mr. Delaney, who is based in Philadelphia, said. As such, he expects to see more firms investing in better software and automation.
"Managers have their trading platforms, but they still do an awful lot of work in Microsoft Excel. As far as day-to-day portfolio management, it's still reliant on manual spreadsheets," Mr. Delaney added.
"There is room for (firms) to create more efficient technology that does a lot of manual downloading of data," as opposed to retrieving data on fixed-income and equity markets from Bloomberg terminals daily and downloading that into spreadsheets, he said.