Technology has sent the giants falling like dominoes. Blockbuster, Tower Records and others failed after they didn’t adapt fast enough to technology.
Asset management is one of the few industries that has yet to be disrupted, but change could be approaching both from technology and legislative assaults.
The discount broker, Charles Schwab, announced earlier this year it is going to offer robo-advisors, or machines to manage client portfolios.
Other reports have speculated how Amazon, Google and Alibaba are all researching how to enter the asset management industry. They would be the first direct competition to money managers from a technology perspective.
In September, I moderated a hedge fund and private equity forum in New York City where leaders from the financial industry came together to discuss emerging trends they are seeing from their insider perspectives. Potential tech and legislative disruptions were some of the most popular questions from fund managers.
The founder of one of the country’s largest compliance firms, Michael Minces with Blue River Partners, detailed how cyber security poses an imminent threat to fund managers, especially smaller and medium sized funds that will face additional expenses following the SEC’s Cybersecurity Risk Initiative, which went into effect on September 15th, 2015.
The JOBS Act is another potential disruption that could ignite competition among fund managers. In the past, hedge funds have found new investors at so-called “investor conferences.” But the JOBS Act enables fund managers to market directly to investors for the first time.
That means overnight, an emerging fund manager can introduce his portfolio, strategy or firm to hundreds of thousands of potential targeted investors with only one news story. Assuming a fund manager meets 15 quality leads at an investor conference, it would take 10,000 days to reach not even a fraction of the potential investors one story in Barron’s could reach.
As the owner of a PR firm that works with hedge funds and private equity groups, I speak with fund managers and financial service firms all the time. I don’t envision hedge funds placing ads in magazines or on TV in the near future, but I do see short-term opportunities to reach retail investors using the news media – traditional, trade and social media.
Deloitte recently published a report that reinforces this analysis. Its report, “Digital disruption in Wealth Management,” details how there are more than 50 Wealth Management start-ups going after the Business-to-Consumer investor.
(You can see the Deloitte report here).
Add in the threats from Google, Alibaba and Amazon and you can see how the fight to find quality investor leads will inevitably change and put those who don’t evolve out of business.
It might take time before technology completely disrupts the asset management industry, but if history is any guide, it’s not a question of if, but when.
