Stronger data and analytics strategies emerge
IT has not generally been the subject of significant strategic thinking in the investment industry. As investment firms look ahead, they will find opportunities to build their competitive edge by amplifying and differentiating their IT initiatives, particularly with respect to data and analytics in the investment process and in the client relationship.
- Whichever direction investment firms take with their IT, they need to devise a clear strategy and implementation plan, which have been generally absent. IT must have agile, adaptive features as well as involvement from well-informed and engaged non-IT-specialized leadership. The need for “T-shaped leadership” is acute with leaders who understand the whole spectrum of issues within their business while also having a wide understanding of the investment ecosystem. The new IT imperative is integrating data strategy into the business with economics front of mind.
- In this narrative, IT strategies will be positioned on three major planes:
- Fintech drives new business models, with regulatory technology (regtech) carrying equivalent force in the regulatory and compliance areas, albeit with less impact.
- Machine intelligence is applied to portfolios and the investment model, customer-oriented intelligence is applied to the distribution model, and cyber-security is applied across the operating model. These technologies create new risks to be managed according to the degree of AI model autonomy.
- To be successful, broad-based IT applications must be adaptive in complementing human skills and resources, and vice versa. The strategy choices include buying or building IT systems and off-shoring or re-shoring.
- Fintech will continue to be a loose term associated with advanced technological changes and business model changes. Nearly three-quarters (72%) of those surveyed expect the influence of technology and data on decision-making at investment firms to grow significantly, and this was even higher among respondents in Asia, at 79%.
- IT strategies need both architecture and infrastructure, which consist of resourcing decisions for talent and IT spend; answering “build or buy” questions; meeting legacy challenges; and improving customer interfaces, with the additional costs and risks of managing data privacy, data security, and cyber threats.
- Technology enhancements involve business models that that improve scale or efficiency or address needs better. We will find many such opportunities in the next 5–10 years, but the pace of innovation adoption will no doubt be uneven. The speed of diffusion of technological innovation will reflect human factors with significant dependence on the speed and depth of socialization, where socializing means influencing the beliefs, norms, and behaviors of the workforce to adapt to new situations.