The trifecta of regulatory change, a time-critical need to reap the operational benefits of AI, and evolving market demand may mean now is the time to pursue modernisation.
Modernisation is not a new topic. Neither is it a static target that can be achieved once and ticked off as complete. Ongoing assessment is required to ensure that your technology estate enables you to remain competitive, does not hinder regulatory compliance, and enables operational efficiency. So why is considering modernisation so important now?
Now may be the time to act as there are compelling reasons across the three common drivers for pursuing modernisation:
- Regulatory change
- Operational efficiency
- Evolving market demand
Regulatory change driving modernisation to enable compliance
The UK push towards T+1 settlement by 11 October 2027, in alignment with the EU and Switzerland, is already driving significant changes in the industry. Tightened timelines for allocations, matching, confirmations, and settlement further increase the need for system and automation enhancements. Work is already well underway with 66% of the industry in “project mode” as of Q3 20251. However, data from the same period highlights that 37% of firms anticipate missing the 31 December 2026 deadline for allocation processing by 23:59 UK time on T+02. As a result of the move to T+1, 85% of fund managers plan to change their fund dealing cycle3.
In parallel, the FCA is currently reviewing how model portfolio services (MPS) firms are implementing Consumer Duty to ensure consumers are receiving good outcomes. Their findings, due in summer 2026, are likely to impact both manufacturers and distributors of model portfolios. This impacts a growth area, with the MPS market growing at an average annual rate of 27% between 2019 and 2025 and representing 16% of the UK’s discretionary wealth management market4.
While we cannot fully predict the FCA’s findings, Discussion Paper DP25/35 raises the potential for standardisation of disclosures between model portfolios and funds to facilitate comparison of risks, costs, and opportunities by investors. DP25/3 also raises the potential for outcome-based rules governing the design and management of model portfolios, and on ensuring that client orders are treated fairly.
Firms with an overreliance on antiquated technology and manual processes have significant obstacles to overcome to ensure the success of T+1 programmes. These same firms will be those most impacted by any increased burden for disclosures and regulatory reporting resulting from expansions of Consumer Duty.
Leaving AI efficiencies on the table erodes profitability and ability to compete
It’s inevitable now that if AI is not being used in your organisation, efficiency savings are being left on the table. The potential efficiencies are considerable. Analysis from McKinsey indicates that the average Asset Manager could realise 25%-40% of their total cost base in efficiencies via the use of AI6.
The opportunities for AI-driven efficiencies are three-fold:
- Automate end-to-end core processes using agentic AI
- Accelerate engineering teams, re-focusing human effort on the most pressing business challenges
- Empower business users with easy access to organisational data, assisted research, and expedited content generation
However, effective deployment of AI requires the right infrastructure and availability of high-quality, trusted data for provision to AI models. The organisations that realise the full benefits of AI will be those who push past limited scope proofs of concept (POCs) and piecemeal use to fully AI-enabled operations.
Evolving market demands challenge yesterday’s technology
Tokenisation and distributed ledger technology (DLT)7 in Asset Management continue to gather steam. There is clear support from the FCA to put the right framework in place to enable adoption of these emerging technologies, with their final regulatory requirements due in the first half of 2026. Tokenisation and DLT are impacting all aspects of the Asset Management value chain across development of new asset types, fund administration and operations, and distribution to clients.
We need look no further than the UK government’s Digital Gilt Instrument (DIGIT) pilot as evidence for mainstream adoption of DLT, which continues to progress the issuance of tokenised gilts with HSBC selected as the platform provider in February 2026.
Tokenisation has the potential to deliver operational efficiencies through real-time settlement and streamlined reporting, as well as reducing the burden for confirmations, matching, and reconciliations. The prospective efficiencies are significant, with analysis by Calastone identifying that operating costs could fall by 23%8 for funds in a fully tokenised environment.
Additionally, there is clear potential to meet the changing investment needs of new, young investors via alternate distribution models, satisfying demand for instantaneous settlement, and providing broader access to private markets.
However, realising maximum benefits from DLT and tokenisation will require both the prerequisite foundations and accompanying skills to enable successful adoption and integration with evolving market infrastructure. If these trends continue, organisations unable to modernise processes and technology will struggle to attract new customers and compete on costs.
Overcoming obstacles
Modernisation is never a stand-alone objective, it’s an enabler to allow business outcomes to be met – “do we have the required insights to identify new opportunities?”, “are we able to meet our regulatory commitments?”, “are we able to grow our client base without prohibitive cost increases?”. Clearly there are compelling business drivers for Asset Managers to pursue modernisation now. If the decision is made to progress modernisation, there are several key obstacles which must be overcome to ensure success.
Resistance to change
Mindsets that are resistant to change and adverse to risk are understandable in a highly regulated industry where the impacts of failure can be considerable. However, successful modernisation initiatives require buy-in from across the organisation. Overcoming this resistance requires effective messaging of the rationale for change and the implications of staying static. Additionally, the specific benefit to individuals must be communicated, over and above the ongoing competitiveness and growth of the organisation. For technologists, the benefits are two-fold: 1) They have a key role in the success of the modernisation initiative which is dependent on their deep expertise of the current technology estate, and 2) it is a learning opportunity for them to develop new skills and expertise.
Current state complexity
Technology estates built up over many years accumulate technical debt and often include additional layers from previous mergers and acquisitions. Any degradation of service or downtime can have serious implications, including regulatory requirements being missed. However, the risks posed by these challenges are significantly more manageable than in the past. Modernisation does not have to be a “big bang” programme with complete end-to-end re-platforming. Thanks to modern platforms and technology, development can be expedited and there is more flexibility for modular architecture with the ability to incrementally add functionality and scale up capacity as required.
Cost to modernise
Evidently any level of modernisation will require investment. Given that technology spend in Asset Management continues to rise, with technology function spend increasing by 36% between 2020 and 2024 for European firms9, increased technology spending may attract increased scrutiny. However, the consideration needs to be on the costs incurred from maintaining ageing estates and the potential future savings resulting from investment in modernisation. The cost is not only monetary, the risk to security and core operations from services reaching end-of-life must also be considered.
Modernise for the future, not the present
Modernisation is not solely about technological upgrades. All organisations structure teams and processes around established technology, and while a naïve rebuild may realise performance, cost, and maintainability improvements it risks missing the wider transformation goal – enabling business outcomes.
At their most effective, modernisation efforts re-imagine systems to enable a future operating model; one that may look radically different to the environment of yesteryear and may need a very different set of technology enablers. Existing systems may provide a blueprint (or indeed a deadline), but it would be a mistake to rebuild them exactly.
Modernisation is not about replacing legacy systems, it is about what becomes possible when you remove legacy constraints.
1 The ValueExchange (2025) UK T+1 pulse survey (September 2025). Available at: https://acceleratedsettlement.co.uk/wp-content/uploads/2025/11/UK-T1-readiness-pulse-survey-vF-21-Nov.pdf (Accessed: 25-Feb-26).
2 The ValueExchange (2025) UK T+1 pulse survey (September 2025). Available at: https://acceleratedsettlement.co.uk/wp-content/uploads/2025/11/UK-T1-readiness-pulse-survey-vF-21-Nov.pdf (Accessed: 25-Feb-26).
3 The ValueExchange (2025) UK T+1 pulse survey (September 2025). Available at: https://acceleratedsettlement.co.uk/wp-content/uploads/2025/11/UK-T1-readiness-pulse-survey-vF-21-Nov.pdf (Accessed: 25-Feb-26).
4 Money Marketing (2025) Platform MPS market has surged 27% a year since 2019, says report. Available at: https://www.moneymarketing.co.uk/news/platform-mps-market-has-surged-27-a-year-since-2019-says-report/ (Accessed: 19-Feb-26).
5 FCA (2025) Discussion Paper DP25/3 Expanding Consumer Access to Investments. Available at: https://www.fca.org.uk/publication/discussion/dp25-3.pdf (Accessed: 19-Feb-26).
6 McKinsey & Company (2025) How AI could reshape the economics of the asset management industry. Available at: https://www.mckinsey.com/industries/financial-services/our-insights/how-ai-could-reshape-the-economics-of-the-asset-management-industry (Accessed: 19-Feb-26).
7 “Tokenisation is a way of representing an asset, or ownership of an asset, by recording it on distributed ledger technology (DLT). DLT is a digital system that records details of transactions in multiple locations at the same time, rather than on a centralised database.” FCA (2025) Consultation Paper CP25/28 Progressing Fund Tokenisation. Available at: https://www.fca.org.uk/publication/consultation/cp25-28.pdf (Accessed: 23-Feb-26).
8 Calastone (2025) Tokenisation: A $135bn opportunity for asset managers. Available at: https://www.calastone.com/insights/tokenisation-a-135bn-opportunity-for-asset-managers/ (Accessed: 23-Feb-26).
9 EFAMA (2025) Asset Management Report 2025. Available at: https://www.efama.org/sites/default/files/files/asset-management-report-2025-v2.pdf (Accessed: 23-Feb-26).
