Asset Management Headed For Shakeup
KPMG says everything's about to change.
BY Staff with files from Benefits Canada | June 18, 2014
The global asset management industry will radically transform over the next 15 years due to seismic shifts in client demographics, technology and changing social values and behaviours, according to a report.
The KPMG International report Investing in the Future predicts that, by 2030, the client base of a typical asset manager will be completely different from today’s, as generation X approaches retirement, generation Y matures and the middle class expands in emerging markets.
“We are on the verge of the biggest shakeup the industry has experienced, and the message to asset managers is clear—adapt to change or your business won’t survive,” says Tom Brown, the firm’s global head of investment management. “The two biggest issues that need to be addressed are the changing client base and technology, and asset managers need to get to work on these areas now.”
The successful asset managers of tomorrow must focus on building cradle-to-grave relationships with a dramatically different and more diverse client base from today, which includes much younger investors, he explains. Brown adds that they must also be mindful that women are increasingly controlling a bigger share of family wealth.
“Demographics are changing. People are living longer and taking greater responsibility for their own retirement planning. Younger generations will likely save more as they see their parents run out of money in retirement,” he says. “We also expect to see a significant boost of new money from the growing middle class in China, Mexico, India, Nigeria and other developing economies over the next 15 years.”
The report also highlights the importance of technological investment and warns that businesses are currently focusing on the wrong areas.
“Many businesses are putting their efforts into trying to unpick the complex legacy of disparate systems and technologies while trying to make sure they provide the right level of control to meet increasingly stringent compliance,” says Ian Smith, financial services strategy partner with KPMG in the U.K. “There is too little focus on building the architecture to meet the business needs of tomorrow. Platforms will need to be completely redesigned with the flexibility to support a much more diverse client base and deliver a step change in costs, control and client experience.”
He says there is enormous opportunity for non-traditional players, which, when combined with continued pressure on margins and the search for capabilities, will potentially kick-start a wave of M&A activity.
Also, new entrants aren’t plagued by legacy issues, and outdated systems can thrive as they can move quickly to implement more relevant digital and data strategies.
“We could see technology companies or large retailers of the world becoming the next big powerhouses in investment management,” Smith explains. “As such, we expect to see mass consolidation in the industry and predict that, within 15 years, there will be half the number of players currently in the market.”