These Asset Managers Are Growing Revenue Faster Than Others

An asset manager’s commitment to technology is highly correlated with revenue growth, a new survey finds.

Marlene Awaad/Bloomberg

Marlene Awaad/Bloomberg

Asset managers that are further along in incorporating technological advances — such as artificial intelligence, the cloud and other emerging technologies — are growing revenue faster than their counterparts that are behind the technology curve, according to a new survey.

Fund managers that are in the top quintile of survey respondents when it comes to implementing technological advances reported an average 3.3 percent annual growth rate over the past 12 months in revenue, compared with 1.1 percent for other fund managers, according to the survey, released Thursday by FIS, a technology and outsourcing firm.

As part of the survey, FIS asked executives from financial services firms, including asset managers, to score their performance on implementing automation, data management, emerging technology, digital innovation strategy, and other operational innovations. FIS then defined the top firms — what it called readiness leaders — as those that had an aggregate score in the top quintile.

FIS launched its first survey three years ago to measure the industry’s use of AI, machine learning, cloud services, and outsourcing, among other technologies and operational innovations that firms employ in an attempt to grow profits. For this year’s survey, FIS and the Financial Times Group’s Longitude unit polled more than 2,000 financial industry executives, including 376 respondents from asset management and 158 from fund administrators.

The revenue gap between the tech haves and the tech have-nots will widen over time, according to FIS.

“What’s most surprising are the extremes,” said Tony Warren, executive vice president and head of strategy and solutions management at FIS, in an interview. “If industry leaders continue to outpace others, those left behind won’t have the revenue they need to invest in the future. It becomes a self-fulfilling cycle.”

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FIS, which provided separate data on asset managers for Institutional Investor, also found that 89 percent of asset managers scoring in the top quintile had centralized organizational data, compared with 51 percent of the rest of the industry, and 58 percent have put applications in the cloud, versus 15 percent for the rest.

Twenty-four percent of the top asset managers that FIS deemed readiness leaders are using AI, compared with just 2 percent for the rest of that group. The AI applications managers use are primarily focused on upgrading customers’ experiences, improving cybersecurity, and preventing fraud.

Although asset managers are leveraging technology innovations to prepare for a future marked by cost and fee pressures, many are still considering mergers and acquisitions.

According to the survey, 38 percent are pursuing M&A to get scale, and 78 percent of firms with assets less than $5 billion are actively looking for a deal.