14 Oct Will next year be a time of transformative change for asset management?
Asset management is undergoing a time of transformative change. Investor demands are changing, and ethics, the environment and technology are leading the way. COVID-19 is forcing greater change on the wealth industry too, turning people’s attention to different sectors and encouraging new ways of investing and managing wealth.
Demographic, technological and economic trends will ultimately transform the wealth industry. And for asset and fund managers, the challenge is to stay one step ahead of investors’ changing demands and expectations.
Multiple factors collide to form a time of transformative change for asset management
Of course, change is the one constant for the wealth industry. As asset managers, investors and entrepreneurs, we already know this. And there is also a cyclical nature to the wealth management sector. But the added challenge of the pandemic is making change happen faster and in more dramatic ways.
Pre-pandemic markets were already tumultuous. Now that there is a global recession and many countries are looking ahead to a tougher economic outlook than the Global Financial Crisis is 2008, asset managers must be ready for the changes.
With Brexit looming and a rise in nationalistic attitudes in many countries, the market could bee even more disruptive over the next few years. But one of the biggest changes the market is facing is driven from within. Our customers now demand seamless digital experiences – this is the true watershed for the investment sector.
How technology is changing everything
Technology is revolutionising the wealth services market in every way. A survey of investment providers shows that the three main forces of change are related to technology:
- New tech, including social media, mobile and analytics.
- A far greater range of competitors and Fintechs.
- Cybersecurity threats.
Across every demographic and segment of our sector, seamless digital multichannel interaction will be the norm. And in many ways, particularly for customers, it’s a game-changer. Technology will lower the cost of asset management and wealth advisory services. And it will also radically alter business models.
There is also a marked shift in emerging markets that will produce new opportunities in 2021. Populations within emerging economies are moving from low to medium per capita income. This is effectively creating a middle class in countries that have not had one before, and these people will save more. This is happening across many countries throughout Asia, Latin America, China and India. Aging populations will also mean a boost to the savings market. Investment providers must therefore be ready to service new markets.
A collective move towards tackling climate change
As a result of these market shifts, customers are demanding more from asset managers and investment providers. It’s not enough to have a depth of investment knowledge and market understanding. Customers want innovative solutions and providers to work to the highest ethical standards.
Asset managers are also demanding change in this area. Investment management firms are calling on companies to commit to a net-zero carbon emitting target. For example, more than 18,000 companies are responsible for a quarter of all global emissions. These businesses include the likes of Tesla and mining corporation Rio Tinto. They have recently been asked by sustainability action group CDP to set a carbon reduction target of 1.5°C. CDP is acting on behalf of financial institutions Legal & General Investment Management, Nikko Asset Management and Amundi.
Climate change represents a threat to investments. And this means any company failing to act on targets will ultimately fail. Tackling climate change means a collective global response from corporations, Governments and wealth managers.
COVID-19 is still playing out, of course, and we will have to wait and see how global economies respond into 2021. But these underlying transformative changes are revolutionising asset management and will continue to do so into the future.