Asset Managers Wary of Robo-Advisors


‘Robo’-advisors are casting a long shadow over the asset management industry, according to the authors of the sixth annual Global Asset Management & Administration Survey that Linedata recently published.

One in four of the survey’s 200 respondents cited new intermediation models, such as robo-advisors, as having the greatest potential to disrupt the industry over the next five years.

This was tied with concerns over clients moving towards alternatives and only superseded by concerns over cybersecurity, which 36% of the respondents named as the greatest potential source of disruption.

Gary Brackenridge,Linedata

Gary Brackenridge,

The fact that 25% of the respondents cited the disruption of robo-advisors providing investment advice is “probably a far greater threat here and now than most people realize,” said Gary Brackenridge, the global head of the hedge fund business at Linedata. “If you look at previous surveys, clients have been quite good at predicting things that are a year or two out. They’re not good at predicting disruption that will happen three to five years out.”

However, he sees this interpretation supported by other results in the survey.

Currently, the greatest differentiator among asset managers is not performance, but client services, according to the survey respondents.

“Most people in the markets for the past 12 to 18 months found it hard to generate returns that stand out among their peers,” said Brackenridge. “It would make sense that firms would choose client services as differentiator – explaining to clients what happened, why the firm’s risk adjusted returns are reasonable , and why the clients should stay with the firm. It’s the ‘over-delivery’ of data.”

From a technology perspective, approximately 35% of respondents, said that their greatest priority was improving legacy systems, which was followed by investments in risk/compliance solutions, data management, and reporting solutions respectively.

“In my mind, that is directly related to improving client services,” said Brackenridge.

“Asset managers don’t need fancy new systems, necessarily. They want to make the ones they have as user friendly and and investor friendly so that they can generate the reports, which will help them stand out compared to the competition.”

On the bright side, survey respondents said regulatory and compliance issues will be less of a priority in the next three years than they were in earlier surveys.

“In prior years, it continued to be a big problem for the day and was likely only to become a greater problem in the future,” said Brackenridge. “Maybe we have started to turn the corner from where it is the dominant topic? It does seem like we are seeing the light at the end of the tunnel.”

Featured image by Tatiana Shepeleva/Dollar Photo Club

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