Innovation trends: Shaping the future of fund administration

Innovation technology is being delivered with increasing speed and offers the potential to improve the way we do things in a myriad of ways but are fund admins in a position to take full advantage?

By Penelope Rance

4 minute read time

Technology will be a significant force in defining the future of fund administration, as more complex applications, more robust platforms and more expertise are required to manage the demands of an increasingly sophisticated investor market. Fund administrators will need to wield technology that delivers hyper-accurate forecasts, individualised CRM, regulatory compliance and faster reporting.

Bespoke solutions could prove crucial differentiators for fund administrators willing to invest, with innovations powered by developments in artificial intelligence (AI), digital currencies, blockchain and other distributed ledger technology (DLT), and the tokenisation of assets. While these technologies aren’t new, 2025 is likely to see evolution accelerate into a revolution, leading to greater diversity of digital assets.

“As much as 10% of all assets globally could be tokenised by 2030,” says Lewis Lane, Strategy & Innovation Manager at RBS International. “Considering the level is currently below 1%, that represents an exponential growth rate, impacting the nature of the assets fund administrators’ clients deal with.”

How technology can help fund administrators

These innovations offer potential operational efficiencies, cost-savings and competitiveness for fund administrators. DLT brings data transparency, universal access and improved fund governance plus instant verification of transactions, origins of capital and investor identities. Digital assets reduce administrative and cost burdens and AI has multiple customer service benefits.

Potential fund admin user cases include:

Streamlining processes: Using a shared data source such as DLT can help streamline processes by preventing double inputs and allowing cross-company use – simplifying KYC by ensuring uniformity and availability of data. “DLT allows firms to accept one version of the truth, meaning there’s no need to request any information or documents again once they’ve been verified,” explains Alex Loukaides, Relationship Director at RBS International. “KYC is like a passport on blockchain.”

Market forecasts: AI-augmented patternisation informs investment strategies, makes predictions about market trajectories, calculates probabilities and manages risk. “AI digests vast arrays of market data and synthesises it,” outlines Lewis. “You can peg in variables and create a forecasting model.”

Portfolio management: By digesting huge amounts of data at speed, AI can identify slivers of opportunity that enhance investment strategies. “It’s great at brute force computation, looking for small margins in vast volumes of funds, where even half a percent can be a big impact,” says Lewis. This kind of analysis also allows administrators to add real value to clients by enabling granular insights into their asset performance.

Customer relationships: Technology can help fund administrators to drive a consistent brand and level of service for clients across global markets, with a single, personalised interface. AI is enabling the evolution of chatbots into autonomous agents who provide a 24/7 investment service. “By using readily available digital assets, it can synthesise an individualised calculation or recommendation in real time,” explains Lewis.

The mindset of the sector

These user cases are compelling, but are fund administrators positioned to embrace this level of technological change? The speed of technological innovation can make it difficult for key stakeholders to ensure they’re building and maintaining the requisite level of knowledge to make decisions on implementation. At C-suite level, most executives have heard of AI, blockchain and tokenisation, but may not be sure of how they can be integrated into their business. While many recognise that they need to start scenario planning, there’s an understandable tendency towards being ‘fast followers’ rather than spearheading change.

“The largest fund admins might be able to dedicate resource via a strategy and innovation team, but there’s potential for an increasing divide in the market between them and those with less available to invest right now, who are still watching and waiting,” explains Alex.

This position has value, believes Lewis. Rather than launching a massive pan-company project, monitoring the trajectory of innovation and impact makes sense for many fund administrators. “It’s about horizon scanning to understand the speed of change – and the cost of catching up. However, fund admins need to be careful about underestimating the amount of money that it will take to implement new technologies if they wait too long.”

Early innovation means more time to recoup, with those ahead on the curve able to drive their cost bases down. “Then we may see a migration of clients to those companies able to deliver more quickly and efficiently,” suggests Alex. “At some point these innovations will become imperatives, and fund admins who don’t implement may begin to lose clients.”

Implementation challenges

Scale is often a major stumbling block in innovation projects, due to a perception of needing to adopt everything all at once. Financial resources are also a polarising factor in tech adoption, with concerns over high upfront investment, unpredictable operational costs and possible spending overruns. “Because it’s difficult to evaluate the impact of an ongoing tech implementation, such projects may be sidelined in favour of short-term ones with immediate, measurable impacts,” observes Alex.

Any new technology brings cyber risks, with AI systems in particular increasing the complexity of fraud for fund administrators entrusted with confidential client data. “Cybersecurity has to be a balance of security versus ease of use,” says Lewis. “Keeping customers and colleagues informed and updated around the latest cyber-risks can help supplement tech strategies and maximise security and trust.”

As the sector continues to experience a wave of mergers and acquisitions (M&A), another key challenge that arises is the inconsistency and fragmentation of data across a mix of legacy systems, data standards, and platforms, which can lead to significant data quality issues. Data accuracy, completeness, and timeliness are factors that are critical when implementing innovative technologies like automation, AI, and advanced analytics. Only by prioritising data quality can innovation technologies be successfully implemented.

Practical steps on the innovation journey

Overcome fear: “These are tools for companies to use, not replacements for people. AI is good at providing outputs but not at showing reasoning. Client contacts still require a human touch to deliver information to customers,” says Lewis.
Start small: “Take smaller journeys and pick low hanging fruit,” suggests Alex. “Find applications that could be useful and build test cases to play with the concepts as opposed to going in en masse.”
Organise your data: “Make sure your data availability and readiness is good in your current system. Then you’ll have the data quality to build on when you bring in new assets,” advises Lewis.
Stay agile: “It’s an iterative journey, not a single project. Mindsets need to be agile, with the topic appearing on agendas and discussed in relation to the business. Engage with trustworthy sources of information, and appoint an innovation champion who presents to the C-suite and wider business,” recommends Alex.
Bring everyone on board: “It’s likely that innovation will come from colleagues on the frontline,” points out Alex. “The more you share information and upskill everyone, the more likely you are to drive innovation.”
Take your clients with you: “Being transparent in explaining how innovation works, and giving them an understanding of it, makes clients feel more secure and better served in working with you,” says Alex.
Collaborate with others: “It’s a positive sum game,” advises Lewis. “The sector can realise more benefits and protect the market if competitors collaborate.”
Form partnerships: Partnerships are a low investment route for smaller players to compete with larger companies who have bigger innovation budgets. “Partnerships enable experimentation and the building of optionality into business strategy, providing flexibility to learn and collaborate in real time,” says Lewis. “It’s easier to simulate market conditions, better understand innovation benefits and boost chances of success.”
Look outside the industry: “These innovations are being utilised across the financial industry, not just in the fund administration industry. Look outside the sector, research what’s been done already, what’s provided a return on investment,” Lewis advises. “If you can show an example that has worked elsewhere, then it triggers the thinking on how it relates to your company.”

To discuss any of the points raised in this article, please reach out to your RBS International relationship team.

Posted in:

Keywords:

Innovation trends: Shaping the future of fund administration

By Penelope Rance

4 minute read time

Latest insights

Innovation shaping the future of fund admin

Is nature ready to move into the mainstream?

Preparing alternative funds for nature reporting