Bigger Isn’t Always Safer - Rethinking Asset Management Vendor Due Diligence

Originally published by FundSense CEO, Jamie Keen, on LinkedIn

There’s a phrase that everyone involved in enterprise software buying or selling has heard: “Nobody ever got fired for buying IBM.” Asset management has its own version of this: the bigger vendor must be the safer vendor. During my career selling for some of the industry’s largest technology providers, I certainly benefited from that perception. 

But after starting FundSense with the ambition of doing things better, faster and more cost-effectively than the incumbents, I quickly found myself in the role of David rather than Goliath - and at risk of over-stretching the metaphor, Goliath had more clients, had been around longer, and had a much bigger budget to take clients out for dinner. 

Recently, a large asset manager said something to us after an RFP selection process that was as surprisingly honest as it was frustrating: “You had the better platform and understood our challenges better, but they had more clients and had been around longer, so we went with them.” 

The negative marks in the spreadsheet for risk carried greater weight than the positive marks for providing a solution that best met their needs. Much as it pained me, having been in this industry for so long I did understand the rationale; when you’re choosing a core supplier, safety and familiarity can be the most important things (no doubt a key factor in why critical asset management processes around the world are still run by spreadsheets!) 

It’s always been this way. But maybe we now need to be asking ourselves what is ‘safer’ in reality? Twenty years ago, the biggest risk may have been whether a vendor would still be around in five years. Today, the bigger risk may be whether your operating model can adapt quickly enough to regulatory change, increasing operational complexity, growing client expectations and, increasingly, AI. 

In other words, have we become so focused on supplier risk that we've started to overlook operational risk? 

For years, our industry optimised around scale, reporting, distribution, and data management. The large incumbent providers became very good at serving that world (and credit where it’s due - many still are), but over the years, operational complexity has changed dramatically. 

Firms now need systems that can adapt quickly. They need workflow orchestration, automation, governance, integration across disconnected teams and platforms, and increasingly, they need AI capability that doesn’t create even more operational chaos. That’s a very different challenge from the one most legacy solutions were originally designed to solve. 

Alongside this, there’s another trend emerging across the market: large vendors growing aggressively through acquisition. On paper, that’s reassuring - more revenue, clients, services and scale. Historically, that has been perceived as lower risk; operationally, it can sometimes create the exact opposite. 

In reality, buyers are often acquiring not one integrated platform, but a collection of businesses, products, databases, workflows, and support teams operating under a single brand. 

Scale is only lower risk if the underlying technology and operating model scale with it. 

The message to clients is that they are getting an end-to-end integrated solution, when in reality, these disparate systems don’t talk to each other properly, if at all. Over time, that fragmentation creates its own operational risk: more siloes, more reconciliation, more duplication, more handoffs, more support dependency, more data inconsistency. Ironically, the very things that asset managers themselves are looking to eliminate by outsourcing. 

The irony is that many of these issues wouldn't have appeared on a vendor due diligence questionnaire ten years ago. Nobody was asking whether a supplier could orchestrate workflows across multiple teams, embed AI into operational processes, or adapt rapidly to new operating models. Those are now becoming critical capabilities; the risks haven't disappeared, they've just changed. In many cases, the DDQs haven’t caught up. 

This all means that some of the things that make large vendors feel safe can also make them difficult to evolve: huge client bases, ageing architecture, long release cycles, standardised operating models, and the often-heard response: “we can’t really do that without a major project, if at all” 

At TSAM, one operations leader at a major asset manager said the following to me about an incumbent provider: 

“As spend on entertaining us rises, service and support move in the opposite direction.”  

Whether fair or not, it highlights an important point: Scale can absolutely bring stability - but it can also bring increasing distance from clients, and the day-to-day frustrations users are actually dealing with. 

At a certain size, vendors may inevitably become optimised around protecting standardisation, revenue streams, and existing operating models. That’s understandable, but it can make responsiveness and agility much harder. It feels to me (from my admittedly biased standpoint) like asset management technology is reaching the point in the cycle that every industry goes through eventually: the companies that dominated one era are not automatically the ones best positioned for the next. 

That doesn’t make the incumbents bad - many have excellent people, great data and strong products - but I do think buyers should be careful not to confuse familiarity with future readiness. 

At FundSense, we do of course have a vested interest; we were built specifically around workflow automation, operational orchestration, and governed AI in asset management operations, not retrofitted into it later. But ironically, given our industry, asset managers often choose past performance as the best guarantee of future results for their vendors… 

There's another consequence of all this that doesn't get discussed often enough: flexibility. 

Even where firms perform broadly similar functions, they rarely operate in the same way. Their governance models, approval processes, data rules, oversight controls and operational workflows have evolved for good reasons and often form part of their competitive advantage. 

FundSense have always worked by what we call the 80/20 rule. The 80% should absolutely be standardised: the platform, governance framework, security controls, automation capabilities, data architecture and operational best practices. 

But the remaining 20% is often where the competitive advantage sits: governance models, operating processes, approval structures, data rules, client commitments and controls. 

The software should adapt to the asset manager, not the other way around. 

That's one of the advantages of modern architecture. What once required major projects can often be delivered in days or weeks rather than months, without compromising governance, controls or auditability. 

The irony is that many firms choose large incumbent vendors because they appear lower risk, only to discover that they must adapt their business to the software rather than the software adapting to their business. 

That feels like a strange definition of safety. For me, the safest platform is one that combines proven controls, governance and best practice with the flexibility to reflect how your organisation operates. The best of both worlds, rather than a compromise between the two. 

Slowly but surely, we’re starting to see this viewpoint becoming more popular, if not yet prevalent. For years, "safe" meant buying the supplier with the most clients. Increasingly, I think "safe" means buying the platform that can adapt fastest when the world changes. 

They're not always the same thing. And as technology becomes increasingly central to how asset managers operate, it's a conversation our industry will have to become much more comfortable having.