3 Reasons Older Investment Firms Will Fall Behind

April 2, 2019 - Stephen Van de Wetering

Outdated practices and ways of thinking will not cut it in the age of automation.

There is something to be said about age and wisdom, but the downside is that for investment management firms 10 years or older, they’re at greater risk of falling behind their younger, nimbler rivals.

Older firms may often be guided by visions and decisions from years ago, but because of the disruptions in technology, the rapid changes render those strategies outdated and ineffective.

And since past methods had worked for so long, a “why change now?” attitude may persist.

Such complacency is dangerous in a fee-compressed, winner-take-all environment. Even the SEC is worried about the changes taking place.

In short, investment managers need to consider new ways. Even if you wouldn’t consider yourself or your firm as “old”, it’s important to be aware of potential pitfalls down the road as your company matures.

Reasons Older Investment Firms Could Be At Risk

Reliance on Legacy Technology

These older organizations may have dumped tons of resources into a software or system that they intend to get full use out out of, but over the years, new technology has made their old systems look obsolete (and their investments regrettable).

That portfolio accounting and trading software may have been cutting edge at one time, but newer systems can generate the reports much quicker and more accurately, as well as manage data more effectively than ever before.

Even if the firms wants to switch, they face several obstacles:

The benefit for newer firms is they aren’t held back by legacy systems; they can access cloud-based and turnkey software that promote flexibility and efficiency.

And during that time, firms with access to the latest technology can find ways to outcompete their less technologically-savvy brethren for clients and market share.

Old School Mentalities

Some of the leaders in the organization might feel they have seen it all and have everything figured out. They became successful, and now they’re comfortable and used to ways of the past.

These individuals may recognize that manual processes for client onboarding and back-office reporting are slow and error-prone, but it might not have occurred to them that automation technology exists or just how effective it really is.

They might not be fully aware of how the technology can perform said tasks faster and with greater accuracy, and that it ends up saving time and money for the organization in the long run.

What’s more, long gone are the days where clients had limited access to information and the advisors had a monopoly on knowing what’s going on.

Now, in the age of the Internet, clients:

In the past, when clients were less informed, firms could get away with higher fees while underperforming.

Firms who haven’t thought twice about their performance justifying current fee structures, or recognizing how well informed clients are today, could be in trouble.


Depending on the size and complexity of an investment firm, the bureaucratic nature of the company gets more developed and hardened into place with age.

The decision-making process is slow, and getting anything important done requires a series of hoops to jump through.

Let’s say someone in the organization wants to adopt robotic process automation (RPA) or make use of a turnkey asset management platform (TAMP), but then comes the dragged out approval process.

They pass their suggestions to higher-ups in the chain of command, who might:

This situation results in bottlenecks, and it can take months or years to get any meaningful and positive change implemented.

Smaller firms with leadership open to change or companies that cut out the bureaucratic red tape will make themselves more competitive and dangerous to their slow-moving rivals.

What Can Investment Companies Do?

Older firms with mostly older employees should not be too critical of themselves.

The business has existed for so long, and the veteran staff have accomplished a lot during that time, but as the organization and individuals get older, it might be harder to keep up with the rapid rates of change in the investment management industry, especially as it relates to technology.

The most important thing is being aware of where the organization is potentially lagging behind, and if current staff are not capable of making necessary changes, then they should assemble a team who can do the job.

Whether it’s hiring in-house or working with third-parties, they should leverage any resource that keeps the organization competitive and relevant to current and prospective clients.

They should find those who can implement that new trading system or portfolio accounting software they’ve always wanted. They can work with an operations outsourcing provider to handle their middle- and back-office work, or leverage a TAMP services provider to get everything in one place. Whether the talent is in-house or third-party, the goal is to make business processes easier and more efficient.

In the process, the staff should make an effort in upgrading their skillsets by learning new technology and challenging old school ways of thinking. Stay up to date with industry news, and follow the latest trends and industry reports.

Access this publication: 
Wealth and Asset Management 2022: The Path to Digital Leadership

Investment management companies should also reduce bureaucracy to speed up the decision-making and implementation process. As clients are increasingly expecting digital and mobile platforms, the organization should take measures to address those needs quickly.

Don’t Risk Falling Behind

The rapid pace at which technology advances is throwing traditional ways of doing things upside down, and investment firms that don’t keep up risk slipping behind the rest.

Older organizations are more likely to be held back by legacy systems, old school ways of thinking and doing things, and among the larger of firms, a bureaucratic process that slows down decision-making.

Investment managers should acknowledge any weaknesses, and they should make an earnest effort to improve with the aforementioned suggestions.

Even if you or your organization are not in fact “old”, it’s important to remain open-minded and flexible to change as the company matures and the industry environment changes.

The reason for change is simple and necessary: outdated practices and ways of thinking will not cut it in the age of automation.