Looking at alternative investment firms’ evolution over the last 20 years, this report, developed with the Alternative Investment Management Association, asks ‘has the magic formula for success changed?’
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Survive. Sustain. Grow.
That progression describes the global wealth and asset management industry from the bottom of the global financial crisis through today. The industry has emerged from the financial crisis to face a changing and complex regulatory and tax environment and a rapidly changing client base that’s older and more risk-averse, yet more sophisticated and demanding.
Firms are now keenly focused on managing regulatory change, risk and volatility and rapidly positioning themselves to compete for market share. Many firms have been forced to consider redesigning their business operating models as part of a renewed strategic focus on aggressive cost control and operational efficiency.
More importantly: growth has returned to the industry. Lines are blurring, both in the regulated and alternative spaces, as managers look to diversify revenue streams and find new opportunities. Firms must fully understand how the distribution game has changed, both globally and locally, and how to most effectively increase revenue and improve margins.
We can help you succeed in today’s market in these key areas:
- Regulatory change, compliance and reporting
As a result of the global financial crisis, enhanced compliance standards have taken hold across the industry for all participants, particularly for alternative managers. Regulators are more focused on risk and reporting than ever before.
Wealth and asset management firms must respond to the new regulatory environment with more disclosure and proactive reporting. They are evaluating their current compliance infrastructure – including people, processes and technology – and thoroughly reviewing compliance policies and procedures.
The review process is by no means a one-off event. Given that many new regulations entail a lengthy and complex rule-making and implementation process, and then likely further amendments to those rules, the only certainty about regulatory reform is continued uncertainty.
- Data architecture and security and efficiently leveraging big data
Escalating compliance costs and greater infrastructure spending suggest that the largest wealth and asset management firms enjoy more scale advantage than ever before. Gaining a competitive edge in pricing is essential given that the demands and cost of regulatory reporting are growing.
Many regulatory requirements focus on data across the enterprise and external service providers. Procedures and systems that many firms had in place before the global financial crisis are likely insufficient to effectively handle the complexity of data analysis now required in the new regulatory environment. Big data’s potential is the ability to aggressively control costs while laying the foundation for growth.
Additionally, cyber security and cyber-crime prevention are ever more prominent challenges.
- Evolving customer demographics and needs
As large populations across the globe transition into retirement, the inevitable drawdown of assets is increasing demand for capital preservation strategies. Increased global life expectancies and the growth in unfunded public sector pension liabilities are reinforcing the need for retirement income and greater personal savings.
Product propositions must change to offer customers greater certainty of outcomes based on a better understanding of their risk appetites. Firms must also provide greater transparency about the availability and details of products they offer.
Managers are capturing client value by focusing on client segments with growth potential and improving the client experience through strong value proposition, exceptional service and appropriate charging models.
- Growth and winning in distribution
Given changing demographics, evolving technology and ever tighter competition, focusing on distribution is a top priority. Aggressive cost cutting, elevating compliance into a core competency, redesigning the operating model and thoughtful investment in infrastructure should help protect margins.
By winning the rapidly changing distribution game, firms will be able to deliver substantial growth and enhanced value to their stakeholders. This will demand a combination of building brand identity, moving closer to the client, mastering social media and mobile technology and skillfully leveraging market intelligence to quickly respond to investor sentiment.
- 2015 global hedge fund and investor survey
- ETF growth brings more influence – and scrutiny
- Rise of the machines in global funds distribution
- Mutual Recognition of Funds between Mainland China and Hong Kong
- Nine trends transforming asset management
- Changes in European asset management distribution
- IT in Wealth Management 2015
- 2014 global hedge fund and investor survey
- Global Fund Distribution services
- Business operating model redesign, operational efficiency and cost management
Faced with the new regulatory environment, a secular trend impacting margin compression and the potential of big data, many entrepreneurial firms will see an opportunity to implement new operating models. These firms will emerge from the operational restructuring process with competitive advantages in productivity, efficiency, flexibility and lower operating costs.
A careful operational review will analyze most non-core functionalities for possible outsourcing or downsizing of headcount in favor of technology-based streamlining and process improvement.
Firms must evaluate product lines, rationalize products and explore opportunities for more effective relationships in order to meet investor expectations.
- Nine trends transforming asset management
- 2015 global private equity survey
- Front-office transformation through technology
- Global Corporate Divestment Study: financial services
- Digital disruption in global wealth management
- Managing complexity and change in a new landscape: global survey on asset management investment operations
- Digital disruption, new opportunities
Digital innovation is the ultimate disruptor. New technologies and tools are upending established wealth and asset management processes and transforming the customer experience.
Wealth and asset management customers expect to engage with firms in completely new ways. They want simplicity, transparency and the flexibility to interact with firms (via mobile and other technologies) on their terms and schedules.
New competitors – unburdened by old thinking and outdated technology – are harnessing the full power of digital to address unmet customer needs.
Regulatory changes are also driving digital innovation. Firms must capture, retain and retrieve data more thoroughly and more efficiently than ever before.
Wealth and asset management firms that effectively develop their digital capabilities will transform disruption into opportunity, building strong investor relationships and demonstrating market leadership.
- Technology-enabled transformation
Wealth and asset managers face challenges from all sides. With margins eroding, asset gathering and business expansion are more important than ever.
Investors and regulators are also putting pressure on operations with heightened demands for access, reliability and efficiency.
Effective technology helps wealth and asset management firms meet these challenges, boosting present-day performance and encouraging long-term growth.
Firms that effectively harness the power of technology can simplify, rationalise and centralise their operations – clearing the way to offer new capabilities that attract investments.
The transformative effects of technology also offer the potential for better integration between front, middle and back offices. That leads to more effective controls and improved risk management.
In the UK please contact:
UK Wealth & Asset Management Leader
+44 (0)20 7951 5131
For press enquiries please contact:
Senior Media Relations Manager
+44 (0)20 7951 1341
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