More asset managers are pinning their hopes on digitalization.
Asset managers are grappling with market volatility and fee compression driven by growing competition, but also higher costs sparked by regulation, increased operational complexity, changing client demands, and new risks. To navigate these prevailing headwinds, managers are increasingly embracing digitalization and incorporating innovative technologies into their front, middle and back offices.
Operating in a high-cost environment
In January 2025, most asset management firms were positioning themselves for a positive growth outlook underpinned by a resurgent U.S. economy. Six months on and amidst rising geopolitical tensions, global trade disruption, and unpredictable equity and bond market movements, assets under management (AUM) growth across most asset management segments has been modest at best.
All of this is happening at a time when the industry’s costs are trending upwards because of regulation (i.e., mandatory clearing of Treasury Cash and Repo transactions, introduction of faster trade settlement cycles, etc.) and fee compression.
Broadridge’s Global Market Intelligence data also shows the average asset management fees in 2023 were 21 basis points (bps), down from 26bps in 2020 and 27 bps in 2018. More recently, fees on 2024 net inflows were approximately 40 bps lower than fees on 2023 existing AUM across mutual funds.1
As fundraising becomes more competitive, asset managers are branching out into new strategies, including private markets, but also passives and actively managed Exchange Traded Funds (ETFs). Although diversification has strategic benefits (e.g., new returns, different sources of capital, etc.) it can create operational issues. For instance, an active equity manager launching a private debt fund will have to recalibrate their operations and technology stacks to manage the idiosyncrasies of running a credit-orientated strategy. This, of course, will add to their outgoings.
Client expectations are changing too, creating further logistical problems for firms. Both retail and institutional investors want a digitalized and hyper-personalized service offering, yet firms are struggling to deliver.
This is echoed in Broadridge’s 2025 Digital Transformation & Next-Gen Technology Study of 175 asset managers, which found 83% of firms plan to increase their spending on innovation over the next two years. According to Broadridge’s study, 50% of asset managers said their legacy technology and processes are inhibiting their ability to deliver a stronger customer experience, while a further 62% conceded that siloed departments, data and technology impede enterprise-wide customer experiences.
New risks take precedent
New risks are also making life difficult for asset managers.
Cyber-crime is becoming a more common problem, and financial institutions, including asset managers, are bearing the brunt of the disruption. This comes as IBM research found that financial institutions - on average - spent $6.08 million dealing with data breaches in 2024, which is 22% higher than the global average.2
If firms are unable to access their data and systems for prolonged periods, or if customer records are compromised due to a cyberattack, the financial reputational and regulatory consequences can be severe.
It is clear the industry needs to do more work to shield itself against cyber-criminals. Although 81% of asset managers are confident in their firm’s current recovery plans, 43% acknowledged that legacy technology and systems are limiting their resilience strategy.
Progress is happening
If firms are to keep costs in check, deliver positive user experiences, insulate themselves against cyber-attacks, and leverage emerging technologies, they will need to double down on digitalization.
In terms of technologies being actively deployed, the study said 87% of asset managers are currently leveraging cloud platforms and applications, followed by cyber-security technology (67%) and AI (63%).
The study also revealed that 89% of asset managers are making moderate or large-scale investments into advanced analytics and data visualization tools, while 87% said the same for cyber-security. A further 84% are making moderate or large-scale investments into AI.
Enabling operational synergies while delivering a better user experience
Historically, extracting cost savings and improving user experiences were often mutually exclusive, but this is no longer the case following advances in technology, principally AI.
The Broadridge study found asset managers intend to ramp up their AI spending by 28%, as firms look to streamline their operations and deliver a better service to clients. As a result, AI is becoming more embedded in asset managers’ day-to-day operations, including in market and investment research (where 68% of firms told Broadridge they are using it), together with note taking and meeting summarization (62%) and analysis/visualization (58%).
Sixty-two percent of respondents said AI would improve employee productivity, enhance reporting (53%), reduce operational costs (49%), and strengthen compliance practices (43%). By automating previously manual intensive, non-revenue generating activities, internal resources can be redeployed to deal with client-facing or more pressing commercial issues.
As asset managers diversify their investment strategies to extend across more asset classes (e.g., growing adoption of illiquids), AI will help firms manage their operations more frictionlessly.
For instance, 38% of study respondents said they are suffering from data quality issues, while 44% said they are dealing with data silos. Some managers who are running hybrid strategies (e.g., public equities/fixed income/private equity/private debt), are starting to use AI to systematize and centralize their divergent data sets, giving them a more holistic view into their firm-wide exposures and risks.
This is having a positive impact on customer interactions and engagement.
With well-organized data and AI, it becomes easier for managers to report information (e.g. portfolio details, risk exposures, etc.) to clients – often in real-time and in a hyper-personalized format.
Per the Broadridge study, 47% of asset managers have rolled out AI chatbots to improve customer service, and 43% have leveraged AI to improve marketing and external communications. Overall, 26% of firms are primarily using generative AI (GenAI) models to improve client experience.
Other client services are also being enhanced by AI, including customer onboarding and target market analytics (i.e., to refine fund distribution techniques). On distribution, more managers are interrogating sales data using AI, enabling them to tailor their fund distribution and sales strategies more effectively.
Thirty percent of asset managers expect to see a positive return on investment from GenAI within six months, and 38% in one to two years.
Combating cyber
Given all of the cyber threats the financial services industry is facing and the various regulations addressing operational resilience (e.g., the EU’s Digital Operational Resilience Act) and data protection (e.g., the EU’s General Data Protection Regulation), it should not come as a surprise that asset managers are planning to increase their cyber-security technology spending by 29%.
This investment is certainly paying off.
Although 39% of asset managers reported it would take them between a week to a month to recover from a cyber-attack, 30% of asset managers reckoned their organizations would be back to normal in a matter of hours, and 29% within two to three days.
Barriers to transformation
Digitalization can unlock a lot of opportunities, but there are obstacles to change.
Nearly 40% of asset managers reported that their technology strategy is not moving fast enough per the survey.
There are several reasons for this inertia. Thirty-four percent of firms said balancing innovation with conducting day-to-day business was the biggest challenge inhibiting innovation. At a time when budgets are being stretched, it is getting harder to obtain approval for digital transformation projects, especially when the ROI may not be realized for several years, if at all.
Having witnessed a number of technology hype cycles over the last few years, some skeptical CFOs may be reluctant to earmark already limited resources for speculative technology change programs.
Of those firms who are yet to adopt GenAI, for instance, 57% said they are simply waiting for the technology to become more mature, while 45% had doubts about the ROI, and 24% admitted there was insufficient budget.
Regulation and compliance requirements are another barrier to innovation, according to 29% of respondents, while 18% blamed the lack of regulatory clarity about next-generation technologies.
A further 26% said cyber-security risks are an impediment to digital innovation; and 24% of firms said the uncertain economic and geopolitical environment was another factor for not investing in digital transformation.
But the outlook is promising
When investing in digital transformation, asset managers face challenges. However, most asset managers recognize that innovation is a key enabler for client retention, operational efficiency, and robust cyber risk management.
See the full study
Our fifth annual Digital Transformation & Next-Gen Technology Study captures the perspectives of more than 500 financial services technology and operations leaders to explore their approaches to data, AI, crypto, cybersecurity, personalization, and more. We combine this with comprehensive Global Market Intelligence product, competitive, and distribution intelligence on over 100T in assets that span across institutional and retail products and clients.
1Broadridge Global Market Intelligence – May 2025
2 IBM – August 13, 2024 – Cost of a data breach 2024: Financial industry