Bill Hortz's picture

 [In a year of much change, competitive threats and uncertainty in the asset management industry, I found these notes from a wide range of industry discussions and perspectives to be a sobering and informative overview on important industry trends. Coming from different vantage points, they paint a good picture on how the industry is evolving.]


At the Investment Company Institute (ICI) General Membership Meeting (May 1-4, 2019)

To open this year’s ICI conference - the leading association representing regulated funds globally - Yie-Hsin Hung, Chair, GMM Planning Committee and CEO, New York Life Investment Management laid out in her address this year’s GMM Conference focus on the fund industry’s biggest issues - “three fundamental shifts that are redefining how we do business and the questions we face in navigating these shifts”:

1. Surging Industry Competition Delivers for Investors, but Firms Face a New Reality – With today’s hyper-competition, fund complexes have launched a wide range of new products and services to meet the evolving needs of investors—delivering those products and increased services at lower and lower cost. Investors also want simpler and more comprehensive information about their investments—and easier 24/7 access to that information. This competition has opened up some big questions as well.

Questions to address: As more fund complexes develop similar products at lower costs, how do they separate themselves from the pack?  How do they make their product the one that people want to buy? As more intermediaries move from commission-based models to fee-based advice—in anticipation of the SEC’s Regulation Best Interest—they’re trimming their product lines. What can fund complexes do to keep their products on these shrinking shelves?

2. A Sound Technology Strategy Is Critical, but Technology Is Only the Beginning - As fund firms work to incorporate the new technologies around big data, artificial intelligence, machine learning, robotics, blockchain , FinTech, and cybersecurity into their firms, a cautionary warning was given to remember that technology alone won’t get firms all that far. “If we’re going to transform tech’s tremendous power into better outcomes for investors, we must be ready to negotiate the many new complexities along the way.” How firms negotiate and incorporate these new complexities is open for intense debate. But no matter the specific approach, a healthy dose of patience and perseverance—along with an open mind— was recommended.

3. Global Thinking Was Once an Option, but Now Is a Necessity – The greatest industry risk in foreign markets today is to ignore these markets. It’s a huge opportunity, but one with obstacles to overcome like traversing this fragmented landscape and many Byzantine bureaucratic hierarchies and unfamiliar governance structures.

George C. W. Gatch, CEO Global Funds Management and Institutional, J.P. Morgan Asset Management continued the theme in his address: “It could not have been clearer that for our funds, for our investors, for our industry—globalization is an unstoppable trend. These trends will create new opportunities for fund investing. They will also place new demands on our firms, our people, our business models, and our relations with regulators.”


At the Ultimus Fund Solutions Client Conference (September 18-21, 2019)

Ultimus Fund Solutions - one of the largest, independent mutual fund services and middle-office technology providers for RIAs in the country - dedicated their 2019 conference for their asset management clients to the theme of Vision 20/20 and provided forward looking perspectives throughout the event. Bob Dorsey, CEO & Managing Director of Ultimus, articulated the need for asset management firms to develop and actualize a strategic vision for their firms in order to grow in this very competitive business environment.

Besides updates on important topics along compliance/regulatory, trustee/board,  Fund reporting modernization topics, much of the conference consisted of deep dive strategic and tactical sessions for asset managers to explore together in an open discussion format:

Growing and Retaining Assets - leveraging segmentation and technology to get the right message to the right audience.

Same Strategy / Multiple Products: Mutual Fund, Private Fund, CITs and more – strategies for driving growth by investigating how different pooled structures can target different market segments and open new avenues to gather assets.

ETF Landscape: Can you compete? – panelists explored the lay of the land and the keys to success for launching an ETF.

Generate Additional Revenue for your Fund – maximizing a fund’s operational efficiency was explored.

Cyber Vision: Seeing today’s landscape - The need for thorough, ongoing employee education and testing was emphasized as a crucial first step, along with strong enforcement against violators of firm cyber policies. A major warning was given that executives of firms need to know exactly where all their data is being held and who precisely has access to it. It was pointed out that many executives either could not answer those questions or were working on incorrect assumptions.

Technology - Of particular interest were the remarks by Gary Tenkman, CEO and Jason Stevens, CTO of Ultimus on the intricate technology challenges of integrating 2 recent Ultimus acquisitions (Woodfield Fund Administration and LeverPoint Management ) and the integration with The Gemini Companies. They outlined how they saw this challenge as an opportunity to reassess their data strategy and decided to build it from the ground up - to not just cobble it together, but cherry pick and build off of their best technologies and experienced technology teams across all firms.

Tenkman:It’s not just the strength of the technology that you have but how you use it, especially developing it with your client partners in mind. We now have not just the most advanced technology in the industry, but also the right people to facilitate sharing that technology with our asset manager clients. Our reassessment and implementation of systems across the enterprise  also allows us to pivot, a quicker pivot, to future client-facing technology.  It’s about how much we can drive ourselves from just the back-office and gain momentum in the middle office by supporting our clients’ needs,  making it easier for asset managers to use and leverage new technologies.”

Stevens:Our tech footprint really changed especially with the Gemini merger. Instead of trying to fit Gemini’s and Ultimus’ infrastructures together into one or the others legacy data center, it gave us the opportunity to think ahead, to re-plan, to re-design our technology infrastructure. We made a strategic decision for this to more than a successful merger of companies and systems, but to think several years down the road to where we want to be. We decided to build a new cloud-based data center from the ground up to be the new engine for our company and not be constrained by current physical hardware and software. We are now in the final phases of this new data center migration and excited to conceive and then integrate this across the enterprise the way we want, versus being held captive by legacy systems and capabilities.”


At the 2019 MMI Annual Conference (October 13-15, 2019)

With the 2019 theme of the Money Management Institute(MMI) Conference being “Reinventing Relevance”, the predominant focus was placed on exploring the notion of “customer focus” and how attendees can create customized experiences that engage:

Complementing the Human Advantage with Technology - your value is based on how you improve and simplify your clients’ lives. In order to maximize that value, firms need the right combination of the human element and technology capabilities. Session explored how the industry is using data and leveraging the benefits of AI and machine learning to transform the client experience.

Lessons in Inspiration and Innovation from Other Industries Leaders - asset management is seeking ideas and lessons learned by examining successful distribution strategies and B2B business models implemented in other industries. Leaders from the pharma, medical devices and hi-tech industries delivered case studies.

Developing New Capabilities to Enable Profitable Distribution - a truly client-centric approach supports tighter integration of sales and marketing. Session delved into what a more client-centric distribution model looks like and the key capabilities to enable such a model.

The Digitization of Assets, Products, and Asset Class Exposures  - session explored the growing interest and utilization of digital assets, cryptocurrency, bespoke products, and direct indexing and how they are being integrated into traditional wealth management service and product offerings

Staying Relevant: The Most Pressing Issues - increasing investor demands for transparency, lower prices and equal access to asset classes and products are driving changes across the asset management value chain and are forcing asset managers, distributors, advisors, consultants and others to re-examine how to profitably create value. The session explored what it really means to “be relevant” to clients and the race to justify relevance.

Craig Pfeiffer, CEO of MMI, in discussions with IID, outlined that a pronounced global perspective, the growing integration of ESG into investment thinking and process (which has been prevalent in Europe for over 100 years), and changing tech and distribution models as 3 of the biggest converging forces he sees reshaping the asset management industry:

Pfeiffer:  “From an asset management perspective, I was struck by the elevated dialogue at our Conference around the global view of their perspectives, running their businesses and managing their portfolios in a global sense with a global mindset, not just as the old mindset of being a US manager located in Boston or wherever that only thinks of US investors. Global regulatory trends – if not here yet it’s coming – along with technology allowing new distribution options with vast choice through customized model portfolios, and cyber security issues - which are global threats -  are all driving and forcing a wider view.

Also mindsets are clearly opening up with an external lens to explore and learn from other industries’ successes and how they confronted similar challenges. It is valuable to have an outside global perspective. Perspective is key in staying relevant to your clients. The industry has been known for a technology evolution in itself, not a technology revolution with its clients. In the past asset management created things and then tried to sell them, as opposed to what clients need.  That is also changing.”                                                ……………………………………………………………

These discussions above demonstrate the dynamic responses being developed on challenges to the asset management industry and the need to more deeply confront “conventional thinking”. The dire negative extrapolations of the asset management industry in some industry discussions are grossly exaggerated as the asset management industry is clearly moving forward. – Bill Hortz, IID


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