The PricewaterhouseCoopers 22nd annual Global CEO Survey included insights from 3,200 CEOs to look at specific industry trends and provide strategic recommendations for the future. For asset and wealth management (AWM), passive investing with its lower fees has disrupted the industry significantly. The decline in fees combined with more streamlined offerings has put pressure on productivity.
Globalization is also affecting AWM firms. While new markets may present opportunities, the complexities of operating in these new markets can be costly. And with geopolitical conditions such as trade talks and Brexit negotiations creating volatility in the market, there are early indicators of a global economic slowdown.
According to the study, CEO’s confidence in their revenue prospects is the lowest it’s been in five years. The study also points out three interrelated steps AWM firms can take to better position themselves for success.
Adopt Technology More Aggressively
As with many industries, data is the new currency. Historically, data has been siloed with disparate often complex networks. “Integrating knowledge about clients, markets and productivity within a firm creates a platform from which organisations can benefit and thrive in today’s competitive market environment.”
Another area with potential is artificial intelligence (AI). More than 9 in 10 CEOs believe it will significantly change the way they do business. Although the writing is on the wall, less than a quarter of CEOs list ‘speed of technological change’ as a threat to their business.
Agile Mergers and Acquisitions
Traditional M&A practices can offset fee pressure, but joint ventures may prove to be better moves. According to the study, “One reason for the inclination to avoid M&A is the gap between sellers’ expectations and what buyers are prepared to pay: often this is simply too great. Indeed, some firms may no longer be worth what they once were because their role is diminishing as changes in investment products, distribution and technology leave them behind”.
This approach is starting to be seen in practice as 41% of AWM are looking at strategic alliances or joint ventures, and only 29% anticipate merger activity.
Nurture 21st Century Talent
With new technology comes new skill requirements. AWM firms are competing not just with each other for top talent, but with startups and existing technology companies. Making recruitment more difficult is the industry’s reputation for being traditional and hierarchical.
As noted in the study, “That perception will have to change if AWM firms hope to attract, develop and retain 21st-century talent. Companies with a more modern expression of work–life balance, diversity and inclusion are the types of places that attract young people who have the digital savvy that asset managers need.”
While seeking new, tech-native employees, firms should also look at retraining programs for the existing workforce. Their institutional knowledge can’t be underestimated, and with a desire to learn new skills, they can provide efficiency gains.
“For AWM firms, successfully evolving and adapting to a new era will depend not only on how artfully they manage new technology, M&A, and talent, but, more importantly, on how they use those aspects of operations to become more productive.” If they can figure this out, it will “drive a future that looks very different, but that will be just as bright.”
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