Why Older Investment Firms Are At Risk of Falling Behind

Outdated practices and ways of thinking will not cut it in the age of automation.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 are often guided by visions and decisions from a previous decade, but because of the disruptions in technology, the rapid changes render those strategies outdated and ineffective.

But 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.

Reasons Older Investment Firms Could Be At Risk

Legacy TechnologyReliance 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 in 2007, but new technology 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 costs to switch are prohibitively expensive
  • fears of bad things that could happen in data export and migration
  • challenges with learning the new technology

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

Old School ThinkingSome of the leaders in the organization think they have got it all figured out. They became successful, but 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 aren’t 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:

  • have greater awareness of their options when it comes to choosing the right advisor
  • can see what’s happening in the markets in real time
  • are less tolerant of high fee structures and underperformance, especially when there is information at hand to critique their advisor

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

Advisors 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:

  • overlook the importance of what is being proposed
  • dismiss any recommendations from a subordinate
  • not pay attention, because they have other things on their mind
  • be interested, but need several reminders to take action

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

Firms that cut out the bureaucratic red tape will make themselves more competitive and dangerous to their slow-moving rivals.

What Can Advisories Do?

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

The business has existed for so long, and the industry veteran staff have accomplished a lot during that time, but as the organization and individuals get older, it’s 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


Advisories 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.

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

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