A century after the birth of the mutual fund, the investment-management industry stands again at a structural inflection. Just as streaming transformed how we consume media, tokenisation, enabled by distributed ledger technology (DLT), is poised to reshape how investors access and trade collective investment vehicles.
The FCA’s recent consultation papers on both tokenisation (further context here), and the application of the FCA handbook for regulated cryptoasset activities in particular, reinforce the speed at which the investment space is changing. CityWire recently published an article discussing their thoughts on ‘traditional funds’ and where they will be in a mere 20 years from now.
The FCA itself recently emphasised that its supervisory approach is forward-looking, outcomes-focused, proportionate and evidence-led. In practice, they have explained and highlighted that firms must stay abreast of the pace of change in technology, not only to keep on top of emerging risks in things like financial crime, but also to look at commercial opportunities for clients within new markets.
Our view is that this evolution can be a strategic opportunity to rebuild with operational resilience. In order for firms to add to their commercial edge, they will need to reimagine their operating model. Within the near future, and at least until such point internal expertise and hiring models reflect true technological leadership, firms will need to leverage external expertise in order to combine growth with operational resilience.
What is the current landscape of externally led change management?
The consulting firm McKinsey & Company, in its’ Global Banking Annual Review, has warned that institutions lagging in the era of generative and agentic AI risk losing up to US $170 billion in profit pools over the next decade. It would not be a stretch of the imagination to assume that they are equally likely to be utilising such methods in-house. Certainly other large consultancy houses including Deloitte have received negative press for doing so to the detriment of their client base.
This signals a broader industry shift: the locus of decision-making is migrating from humans, through large consulting firms and off-the-shelf AI platforms, to hybrid models of human/machine.
For asset managers, the challenge will be less about launching innovative new products, but how to manage the shift towards proactive, data-led and near-real-time processing. That shift demands new skill sets, infrastructure, governance frameworks and oversight architecture.
As funds become tokenised, but also as quantitative, data-led trading becomes standard practice, central functions must also evolve. The transformation within compliance teams and central operations must mirror the commercial and strategic pivots towards new asset classes and reimagined financial services.
The Triadic Model
In this evolving model, it is more important than ever to maintain the top talent in-house in order to propel businesses forward and create the change towards a more efficient operating model. However, the blend of external expertise can contribute meaningfully where used alongside internal teams:
- RegTech platforms deliver the automation backbone: building internal proprietary systems is impractical and near-impossible for smaller in-house teams that are run lean to a defined parameter of operations. Finding solutions that work flexibly, arbitraging out redundant models with current infrastructure to enable better data ingestion, more precise exception-driven alerts and continuous regulatory reporting can be exceptionally effective.
- Internal compliance teams become strategic hubs: defining risk appetite, interpreting dynamic regulation and data-driven outputs, overseeing vendor governance and embedding culture-, conduct- and technology-fluency into the firm.
- Specialist boutique consultants and partners become the integrators and enablers: translating novel regulation into operational design, embedding RegTech solutions, and aligning compliance, data, operations and tech as well as bringing expertise from different integration parameters and challenges seen.
This triadic model RegTech + Internal + Consultants is where firms achieve genuine advantage. Large consulting firms, despite their brand capital, often rely on generic models and may lack the deep, embedded regulatory experience required for a principles-based regime like the FCA’s. The FCA is clear that supervision is not purely rules-based but judgement-driven and tailored to the risk profile of the firm.
In contrast, boutique consultancies frequently combine this regulatory fluency with practical operational experience within internal teams, which means they are better positioned to deliver risk-based, proportionate models rather than off-the-shelf check–lists driven by AI consumption.
Consultants and external experts in this environment add value via three key mechanisms:
- Regulatory translation – interpreting evolving rules, guidance and supervisory approaches;
- Operating-model transformation – designing the hybrid framework, integrating RegTech, embedding data governance, and aligning cross-functional teams;
- Accelerated execution – internal teams often struggle under legacy pressures and resource constraints; boutique service providers bring project-delivery, change-management, tech-deployment and governance implementation capabilities.
The evolving role of internal compliance teams
Technological innovation and regulatory expectations are reshaping the compliance hiring model. Traditional teams, often large, siloed, and reactive, will evolve into leaner, high-calibre units that combine regulatory acumen with technological and strategic capability. Under the FCA’s increasingly principles-based regime, success will belong to compliance functions that act as business partners, embedding regulation into business decisions with agility, evidence, and accountability.
Principles-based regulation places the onus on firms to interpret and operationalise broad regulatory expectations, such as the Consumer Duty, rather than to comply with prescriptive rules. This demands judgement, data, and a clear audit trail demonstrating that consumer outcomes have been considered and foreseeable harm has been mitigated. In contrast, U.S. firms operate under a more codified and rules-driven regime, where compliance is often more procedural than interpretive. KPMG benchmarking indicates that U.K. and European asset managers and hedge funds allocate a higher percentage of their operating costs, or assets under management (AUM), to compliance functions compared with U.S. peers. This supports the view that operating under a principles-based system is inherently more resource-intensive, as it requires deeper expertise, continuous interpretation, and alignment with the firm’s strategic and risk framework.
For U.K. firms, the implication is clear: compliance teams cannot scale through headcount. Cost pressures and regulatory complexity mean that lean, intelligent, tech-enabled teams will define competitive advantage. The compliance function of the future will orchestrate regulatory change across the enterprise, embedding it through systems, not spreadsheets, and leveraging automation and AI to free capacity for higher-value judgment and oversight.
The most successful compliance and risk functions will:
- Automate and streamline manual oversight to focus expertise on risk assessment, outcomes, and strategic decision-making.
- Enable innovation with assurance, using technology and data analytics to allow rapid but controlled product launches and regulatory change implementation.
- Adopt outcomes-based surveillance models that provide near real-time insights, shifting from reactive to predictive and preventative monitoring.
In essence, principles-based regulation requires fewer people but sharper minds – professionals who can interpret, adapt, and operationalise regulatory expectations in tandem with business strategy. Firms that master this balance between agility, technology, and regulatory integrity will enable both commercial and regulatory success.
Building Future-proof Fund Businesses
Looking ahead, asset managers will need to redesign their business architecture with the following attributes:
- Lean core functions, strategically embedded but agile, focused on oversight, risk strategy and culture rather than manual control functions;
- Strategic use of external expertise including consultants and IT specialists to navigate continuous regulatory change, evolve models, integrate RegTech and bridge internal silos;
- RegTech-powered operations: flexible RegTech that enables an input and standardisation of diverse data types to deliver Transparent views on risk.
Conclusion
The future of investment management is defined by the convergence of human intelligence, technology, and AI engineering. As firms move toward data-driven, near-real-time operations, the challenge is not just adopting technology but integrating it intelligently within a principles-based regulatory environment, where AI cannot replace human judgement. AI will simplify data review and some level of execution, but only humans can interpret intent, proportionality, and risk appetite.
This is where the hybrid operating model becomes critical, combining internal governance and strategic oversight with external expertise in IT, RegTech, data architecture, and AI engineering. Most internal teams lack the capacity and, in many cases, the specialised capability to deliver end-to-end technological and strategic transformation alone. External partners bridge this gap, translating complex regulation and operational needs into scalable, resilient, and compliant systems.
In the next phase of evolution, success will depend on convergence of tech and human teams, guided by regulatory principles but enabled by intelligent design. At Elira Solutions, we see this not as a shift away from people, but as the elevation of their role, where human insight directs technology, and technology empowers human potential.
Firms with compliance teams that mirror innovation in regulation and financial services environment will deliver the best outcomes.