“The asset management industry is in its infancy using the true magnitude of these types of capability, but there will be more pressure on us to harvest them more.”
Rapid advancements in technology – including big data analytics, cognitive computing and digitisation to improve customer experience – is the number one megatrend for the global asset management industry.
Ms Buckingham was formerly a medical practitioner in Melbourne who shifted to McKinsey before landing at BlackRock, where, as head of strategy, she worked closely with the firm’s legendary founder Larry Fink and has been touted as a potential successor.
Her presentation revealed the extent to which asset management is turning into a technology game, driven by scale and lower costs. Of BlackRock’s 15,000 staff, more than 1600 are IT developers and 27 per cent are in technology roles.
It’s looking like ‘frenemies’
This has fundamentally changed recruitment practices, because “it’s obviously the very large tech companies who have become our direct competition and retaining this talent is absolutely essential,” she said.
It was likely that BlackRock and other global mega-investors will have to become “frenemies” with the big technology giants, who are already gathering up the data that will provide competitive advantage in the future.
One related, emerging risk for the industry is the regulation of this data. Dr Buckingham said this was becoming more localised. Pressures are growing to supply locally manufactured products and regulators are wanting to see more and more business onshored in particular countries.
“This is becoming more and more pressing with data, as that becomes the oil of the industry,” she said.
“So you are seeing fragmentation in the business, by regulation requiring more and more localisation and generally the populist trends in politics. This is something that is building slowly, but we believe it’s going to have a significant influence on the industry.”
This additional regulation, more sceptical views about globalisation, the low return environment, and the shift in wealth towards the Asia Pacific region, are the other megatrends shaping the industry. While these have been playing out for some time, “we really believe they are becoming more acute because to some extent the tide’s out in the asset management industry,” Dr Buckingham said.
“It’s been a difficult year and the market has exposed, for many clients, they not going to meet financial objectives.”
That makes the imperative to try to adopt new technology even more pressing. “It’s really about not treating tech like the IT department. It’s something we all have to push ourselves to become more knowledgeable about,” she said.
“We have to caution ourselves, with a little bit of healthy paranoia, that the winner in our industry – given what tech can do – may not actually be in our industry today.”
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