Investment managers are under growing pressure to reduce fees, deliver stronger performance, and provide a higher level of service—all while protecting profitability.
As a result, many firms are turning to technology to improve efficiency and control costs.
But with a rapidly expanding landscape of solutions—and the operational and organizational risks that come with change—deciding when and how to modernize has become increasingly complex.
These challenges were the focus of our recent webinar, “Technology at a Turning Point,” which presented findings from an Institutional Investor survey of more than 150 investment and operations leaders.
Together with Verity Larsen, CEO of Versoft Consulting, I explored how firms are approaching next-generation technology, the pace of change, and the role of external partners in driving progress.
In this post, I’ll highlight the key takeaways from the research—and what they mean for investment managers navigating this increasingly complex landscape.
Investment Managers Report a New Focus on Financial Technology
One of the most notable shifts between Institutional Investor’s 2023 survey and today’s findings is how investment managers are approaching technology.
What was once characterized by incremental change has evolved significantly: nearly half of firms now report plans to make meaningful investments in—and changes to—their technology ecosystems over the next three to five years.
Two years ago, firms largely focused on the risks and costs associated with adopting new systems, prioritizing smaller, incremental improvements.
Today, that mindset is shifting. Investment managers are increasingly willing to embrace new technologies—particularly AI and integrated platforms that connect front-, middle-, and back-office processes.
In my view, whether through technology or investment strategy, firms are ultimately looking to differentiate themselves. While each firm takes a different approach, one thing remains constant: servicing the end investor drives how they think about their technology stack, their business, and where they’re headed.
As a result, we’re seeing a dual focus emerge—one that prioritizes both improving internal operations and enhancing the client experience.
That said, barriers to this more holistic approach remain. Firms continue to report that securing broad organizational buy-in is a key challenge.
This aligns with Verity’s experience working with clients. As she notes, several factors contribute to this hesitation, including fear of change, competing priorities, cost, and more recently, uncertainty around the evolving economic outlook.
At the same time, firms are beginning to move beyond strategy and into execution—translating vision into tangible progress.
The Value of Unified Data
Another key difference between 2023 and today is the growing emphasis on connecting the front, middle, and back office to create a unified view of data.
Across the board, firms—regardless of size, client base, or asset class—are looking for a unified data model. What’s changing, though, is how thoughtfully they’re approaching that goal. Increasingly, firms are asking more nuanced questions about their data: What is the timing? Does it need to be real-time, everywhere, all the time?
Verity builds on this point by emphasizing that while many firms are rethinking their processes and systems, the underlying challenge often comes down to data itself.
As she explains, reliable reporting—and the ability to work effectively across both legacy and new platforms—depends on a strong data foundation.
She also underscores the importance of leadership in driving successful outcomes. Senior management support isn’t just helpful—it’s essential for guiding adoption, enabling execution, and sustaining change across long-standing processes. Without it, even the best technology can struggle to gain traction.
AI Adoption: Aspirational or Ready to Deploy?
The Institutional Investor survey shows that firms are actively evaluating or deploying AI—including machine learning and NLP—to improve performance and reduce costs.
But challenges remain.
Too often, firms begin by selecting an AI use case. In my view, a more effective approach is to first identify operational inefficiencies and then determine where AI can meaningfully address them.
Operations teams, in particular, are well positioned to identify these opportunities. While their work may be less visible than front-office functions, the impact is clear in areas like reconciliation, data management, third party interfaces and applications, and identifying poor-quality data.
Verity also cautions against defaulting to AI as the starting point.
As she points out, simpler solutions—like automation and system integration—can often solve the problem just as effectively. When organizations look to improve processes, that’s where they should begin. Strong data, seamless integration, and reliable automation create the foundation that can eventually support AI and other LLM-driven initiatives.
As firms continue to adopt AI, data governance and security remain critical.
Organizations need to take a step back and ask key questions: How will data be used? Who has access? How is it controlled? Addressing these questions early provides clarity and confidence in how AI tools can be used effectively.
Assessing the Long-Term Viability of Financial Technology
As firms evaluate new technologies, there’s an increasing focus on long-term viability. But defining what that means—and translating it into concrete requirements—can still be a challenge.
Firms are growing in different ways: through acquisitions, new distribution channels, and expanding product offerings. While not every capability needs to be in place from day one, it’s essential to build a foundational framework that can scale alongside that growth. That’s a key part of future-proofing any technology decision.
Verity often works with teams that are frustrated with their current systems and assume the solution lies in replacing them entirely—whether that’s portfolio accounting, performance, or trading platforms.
In practice, her team takes a more measured approach, starting with an assessment of how technology is actually being used and what the organization needs to deliver to clients and stakeholders.
More often than not, the biggest opportunity isn’t a full replacement. Instead, it lies in refining data, workflows, and system configurations—changes that are significantly more cost-effective than a complete overhaul.
Outsourcing Technology Systems and Business Processes
The research also shows that investment firms are becoming increasingly open to outsourcing both IT systems and business processes to third-party providers.
When considering what to outsource, I encourage firms to start by identifying where they truly create value—whether that’s client service, investment philosophy, or portfolio management. This helps ensure they retain the capabilities that differentiate them, while outsourcing functions that are less central to their core value proposition.
Verity notes that workforce considerations are also playing a larger role in these decisions. Training, knowledge transfer, and employee turnover can be both costly and time-consuming—especially in highly specialized technical roles.
Some firms are addressing this by partnering with managed service providers, which offer integrated teams with deep expertise across areas like cybersecurity, cloud infrastructure, and regulatory compliance. This model allows firms to access specialized capabilities without the cost and complexity of building them in-house.
Learn More About How Investment Managers Are Modernizing
Watch the webinar to learn more about how investment managers are prioritizing change, managing risk, and building a practical path toward modernization and growth.
Then explore the full Institutional Investor report, The Next Generation of Technology for Investment Management, for deeper insight into the ways firms strike the balance between innovation, cost control, and long-term growth.
