Why Asset & Wealth Managers Need to Rethink Their Approach to Innovation
We’re seeing a contradiction in financial services. Asset and wealth management firms are under pressure to innovate rapidly while grappling with the complexities of retiring legacy systems and modernizing their capabilities. The result? A technology paradox that’s creating both extraordinary opportunities and existential challenges.
The Reality Check
Let’s start with some uncomfortable truths. The average share of technology in total operating expenses has increased to over 15% across both wealth and asset managers, up from 13% five years ago. Yet despite this massive investment, wealth managers recognize the potential of technology but find existing tools insufficient to meet client expectations.
This disconnect isn’t about budgets—it’s about approach. Sixty-seven per cent of asset and wealth managers cite concerns about the accuracy of decisions made by technology as the primary hurdle to adopting disruptive technology within their firms. We’re caught between the imperative to modernize and the fear of making the wrong technological bet.
The Three Pillars of the Modern Challenge
1. The Integration Nightmare
AWM firms face the costs, challenges, and risks of retiring legacy systems and modernizing their capabilities, while integrating what is likely to be diffuse and complex tech infrastructure. Most firms aren’t starting with a blank slate—they’re trying to bolt cutting-edge capabilities onto systems that were designed for a different era.
The consequence? Fragmented data landscapes, inconsistent client experiences, and operational inefficiencies that erode the very margins firms are trying to protect.
2. The Speed vs. Quality Dilemma
41% of executives believe their technology strategy is not progressing quickly enough at its current pace, yet rushing implementation often leads to costly mistakes. The pressure is intensifying as clients expect their advisor to keep up with rapidly advancing technology.
This creates a fundamental tension: How do you move fast enough to remain competitive while ensuring the quality and reliability institutional clients demand?
3. The Democratization Challenge
The democratization of alternative assets and increasingly sophisticated client expectations are forcing firms to deliver institutional-grade capabilities to a broader market. Yet building these capabilities in-house requires resources that many firms don’t have.
A Different Way
The firms that are thriving aren’t necessarily the ones spending the most on technology, they’re the ones thinking differently about how to deploy it. Rather than trying to build everything in-house, they’re embracing what I call “intelligent aggregation,” the strategic combination of best-in-class external capabilities with their core differentiators.
Consider the math of this approach. Building sophisticated risk analytics, performance attribution, or compliance screening capabilities from scratch can take years and cost millions. But what if you could access institutional-grade analytics through a modern API that integrates in days rather than months?
The Analytics Advantage
Here’s where the conversation gets interesting. Today’s cloud-native platforms can process data and analytics across more than 9 million global securities, providing flexible, scalable solutions that were once the exclusive domain of the largest institutions.
The implications are profound. A mid-sized wealth manager can now offer risk analysis and portfolio construction tools that rival those of the biggest players—without the infrastructure investment or operational complexity. This isn’t about replacing human expertise; it’s about augmenting it with technology that makes sophisticated analysis accessible and actionable.
The Competitive Reality
We estimate that fees are likely to continue declining through 2025, driven by passive investments, regulatory scrutiny, and new fee models focused on performance. In this environment, the firms that will thrive are those that can deliver superior outcomes more efficiently.
Technology becomes the great equalizer—but only if implemented thoughtfully. The goal isn’t to have the most sophisticated tech stack; it’s to have the most effective one. This often means choosing solutions that integrate seamlessly, scale effortlessly, and deliver results immediately.
Looking Ahead: Three Strategic Principles
1. Build Where You Differentiate, Buy Where You Don’t
Your core differentiator likely isn’t your ability to calculate Sharpe ratios or perform Monte Carlo simulations—it’s your client relationships, market insights, and investment philosophy. Focus your development resources there and leverage external expertise for the foundational analytics.
2. Embrace Modular Architecture
Truly modular approaches enable seamless integration of exactly what you need, without disrupting your existing infrastructure. This flexibility becomes crucial as client needs evolve and new capabilities emerge.
3. Prioritize Implementation Speed
With implementation measured in days rather than months, you can quickly enhance your platform with institutional-quality risk and performance metrics that scale with your business. In a rapidly changing market, speed of deployment often matters more than perfect customization.
The Human Element
Technology’s role isn’t to replace human judgment, but to enhance it. The future of wealth management isn’t about individual tools, but about sophisticated orchestration—creating an intelligent ecosystem where systems communicate, learn and adapt in real-time.
The most successful firms will be those that use technology to free their professionals from routine analytical tasks, allowing them to focus on strategic thinking, client relationships, and value creation.
The Bottom Line
Time is of the essence. AWM leaders can no longer delay their transformation efforts as socio-economic, investment and funding disruptions sweep aside old ways of doing business.
The technology paradox isn’t really a paradox at all—it’s a strategic choice. Firms can continue trying to build everything in-house, struggling with integration challenges and lengthy development cycles. Or they can embrace a more agile approach, leveraging best-in-class external capabilities to accelerate their transformation.
The winners won’t be the firms with the biggest technology budgets. They’ll be the ones that deploy technology most strategically, creating competitive advantages through intelligent aggregation rather than expensive customization.
What’s your perspective on the technology paradox in asset and wealth management? How is your firm navigating the balance between innovation and integration?
Paul Louden leads the sales team at FinMason, a financial technology firm that provides one of the world’s largest independent investment analytics engines for financial services platforms and investors. To learn more about how APIS can transform your investment analytics capabilities, visit finmason.com or set up a call.
