3 minute read 6 Apr 2020
woman walking across suspension bridge

How resiliency can help manage through uncertain times

By Mike Lee

EY Global Wealth & Asset Management Leader

Spirited leader for wealth and asset management. Champion for change. Driven to produce better outcomes and simplify the complex. Passionate about family, friends and sports.

3 minute read 6 Apr 2020

As the COVID-19 pandemic evolves, wealth and asset management firms need to consider how they will respond to longer-term impacts.

I’m a big fan of quotes – both historic and current. Often, I’ll print out those I’ve heard or found memorable on topics such as leadership, happiness, culture and teaming and post them in my office at work or home. They serve as my “North Star” to help center and focus during these ever-changing times.

The COVID-19 situation has created significant challenges and new uncertainties for businesses and society at large. As I was reviewing the recently released EY Global Capital Confidence Barometer (CCB) report, the question on the cover caught my attention: “How do you find clarity in the midst of a crisis?” A quote I have in my home office about resilience jumped out immediately: “Resilience requires creativity and flexibility: the creativity to explore multiple viewpoints and the flexibility to embrace a positive but realistic assessment – or reassessment – of a challenging situation.”

As noted in the CCB, there is no playbook for this pandemic and leaders are reconfiguring and readjusting in real time as events rapidly evolve. Resiliency isn’t just about addressing the “now,” but recognizing the need to reassess the “next” and anticipate the “beyond.”

Addressing the “now”

Like companies in most sectors, wealth and asset management (WAM) firms’ immediate focus has been on the well-being of their people, addressing client needs and overall business resiliency and operational continuity. Significant reduction in AUM based on market deterioration, attendant valuation and liquidity challenges are greatly impacting financial results. According to the CCB, over 55% of WAM executives expect a severe impact to their business’ profitability and margins.  

Resilience requires creativity and flexibility: the creativity to explore multiple viewpoints and the flexibility to embrace a positive but realistic assessment – or reassessment – of a challenging situation.

Reassessing the “next”

Coming into 2020, many WAM organizations were in the process of executing transformational changes to their business. They may have been focusing on digitizing their customer experience and distribution strategies, making wholesale changes to data management and technological infrastructure, re-evaluating operating models and the use of automation, or identifying M&A opportunities for scale. But in the current environment, firms are reconsidering how essential these types of decisions are. Nearly 45% of WAM executives said that due to COVID-19 challenges, they will need to re-evaluate their decisions related to speed of automation and digital transformation.

Reframing for beyond and the “new normal”

Although many organizations will face similar challenges, each will have unique needs to address as they consider how to move forward in a post-COVID-19 world. Almost 50% of WAM executives stated they will need to re-evaluate operating models and supply chains.

Our team foresees a significant focus on strategic cost transformation initiatives as organizations reassess third-party relationships, location strategies, operational continuity plans and workforce management. With valuations expected to be lower, nearly 40% of organizations see opportunity to gain market share via M&A – though there will be a greater focus on the target’s business resiliency.

Resiliency going forward

With challenge comes opportunity. This crisis may well accelerate certain activities that had previously been plodding along. Some markets are already showing a greater openness toward virtual or digital approaches related to distribution and client interaction. New ecosystems are being created as participants recognize the sum of the parts (e.g., collaboration, partnering) may be greater than the whole (e.g., one doing everything).

We’re all in this together. Creativity, diverse viewpoints, flexibility – I see these characteristics being demonstrated by our teams and clients today. Such resiliency will be both a priority and mandate going forward. Just like we see health care systems uniting and sharing globally to defeat this common foe, our industry will need to do the same to drive financial well-being.

Summary

Resiliency isn’t just about addressing the “now,” but recognizing the need to reassess the “next” and anticipate the “beyond.” Such resiliency will be both a priority and mandate going forward for wealth and asset management firms.

About this article

By Mike Lee

EY Global Wealth & Asset Management Leader

Spirited leader for wealth and asset management. Champion for change. Driven to produce better outcomes and simplify the complex. Passionate about family, friends and sports.