The asset management business may never be the same, despite record levels of assets under management and annual profits.

In 2014, global assets under management totaled $74 trillion and annual profits reached $102 billion, according to the Boston Consulting Group. However, lurking beneath these seemingly rosy figures are disruptive economic and technological forces that may upend this industry.

Since 2007, asset management costs have skyrocketed 44 percent, according to the McKinsey consultancy firm. These extraordinary expenses are due to the technological infrastructure that is required to support the sales, marketing, and distribution of highly complex financial products. The cost increases have outpaced revenue and asset growth, slenderizing profit margins in North America, western Europe and the emerging markets. Further, the growing cost structure may not subside any time soon.

While new asset flow has reached its highs, much of the asset level growth has been due price rises in stocks and bonds. These markets exploded when the Federal Reserve expanded the monetary base four-fold and lowered the discount rate to near zero. In addition, much of the new money streamed into passive products, such as exchange-traded funds that track indices: these require less active management and have lower profit margins.

Also looming on the horizon is the likely prospect of higher interest rates: as interest rates increase prices of stocks and bonds fall to maintain competitive asset yields. Profit margins may fall 16 percent with an interest rate rise of 1 percentage point, according to McKinsey.

These asset managers have begun to diversify into debt products, such as leveraged loans, since they escape the regulatory burdens faced by banks. This is of concern, since these firms have the potential to become systemically important financial institutions that would require the maintenance of adequate capital reserves, especially since banks are unavailable as market makers to maintain market liquidity for any buyer and seller.

Another danger is the rapidly accelerating industry consolidation. In 2013, the top 10 US asset managers experiencing positive net inflows, such as Vanguard, BlackRock and State Street Capital, received 53 percent of the total. By 2014, this figure grew to 68 percent, since much of the flow was in the form of passive products — a segment dominated by a few firms, including Vanguard.

Perhaps more dire than the underlying economic fundamentals, the asset management model is under heavy attack by the technology industry.

Since the financial market is based mainly on short-term, speculative and arbitrageur trading methods, algorithmic portfolio managers have been moving into this space at a rapid pace, catering to the retail market.

A new threat recently came in the form of a Google alert. This technology behemoth is seriously considering a move into the industry after commissioning a project feasibility study. Coupled with virtual currencies, technology may be the new normal in finance.

Given this trajectory, the financial industry may be unrecognizable in the decades to come.