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Focus On: Asset Management |
Top business challenge: Differentiating services from those of larger, better-resourced firms
Solution: Target investments to develop innovative products and increase customer service
How IT can help: Develop sophisticated modeling programs that enable firms to offer innovative products; improve Web sites by offering customer-focused services
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When it comes to asset management companies, individual investors increasingly have a choice between big, brand-name companies like Merrill Lynch and small firms that offer personalized service. And midsized asset management firms are being squeezed by those competitors: Fortune 500 financial companies that offer a wide range of products and specialized boutiques that offer high-touch service, says David Schehr, a research director at Gartner Inc.
Indeed, the largest firms control the majority of managed assets, according to the Investment Adviser Association (IAA). Just 4% of the 10,290 U.S. registered investment advisers collectively manage 82% of all assets under management, according to IAA. At the other end of the spectrum, firms with fewer than 50 employees comprise some 90% of all registered advisers.
Emphasizing the Tactical
To prosper in this environment, midmarket firms need to use their limited resources to differentiate themselves, according to an April 2006 Gartner study of IT spending at investment services firms. The two prime targets: quickly developing innovative products and enhancing customer service. And strategically, firms need to build flexible IT architectures that can rapidly adapt to changing business models.
Large investment companies typically have their own IT staff, while boutiques may have only one IT person or may outsource IT altogether, says Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, a 2-year-old subsidiary of Fifth Third Bancorp, which is headquartered in Cincinnati. "[Large companies can] make a huge commitment to technology at a level that we can't, but we're not so small that we have a simplistic business model or can go completely to outsourcing," says Wirtz. In addition to his business role, Wirtz also supervises the subsidiary's IT. The parent bank has dedicated four people from its IT staff to support Fifth Third Asset Management, which has 140 employees. "Our challenge is how to support a multiproduct offering and multiple investment teams when we are not resourced at the level of a Fidelity."
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