Across the globe, pensions, insurance companies and other financial institutions are keeping tabs on how quickly technology is advancing.
And they’re optimistic about the potential impact of artificial intelligence and other innovations, says a 2018 survey of more than 900 such respondents across 25 countries by Fidelity Asset Management.
By 2025, 62% expect that trading algorithms and other tools will help make markets more efficient, while 80% forecast blockchain and similar technologies will fundamentally change the industry, a release says.
The investment landscape will also change as new entrants come into the financial industry, survey respondents said. A majority (75%) expect non-financial technology firms will come on the scene, causing some traditional firms to merge or be acquired as they compete with fintech companies.
Firms that aren’t preparing for this shift should take heed, the release says. In the U.S., in particular, 77% of respondents aren’t yet testing or considering how AI and advanced analytics may be useful to their investment processes—that compares to approximately one-third globally.
This could be an issue since many institutional investors expect to rely on AI in the near future for capabilities such as asset allocation (69%), performance and risk evaluations (67%) and creating custom portfolios (39%).
More than half of survey respondents (53%) said some traditional investment roles and tasks will be replaced by technology in the future.
However, 60% said tech will augment their jobs rather than eliminate them. Institutional investors will continue to value the human connection as well as the “expertise and insights their investment partners bring to the table, including non-investment perspectives on market psychology, emerging opportunities, strategy and problem-solving,” Fidelity AM says in the release.
Along with technology spurring change, “Institutional investors also expect a transformation of the investment workplace as millennials bring fresh ideas into the work environment, push for social change and move into senior roles,” the release adds.