All financial experts agree saying that 2014 was a quite eventful and challenging year for independent asset managers. Among others, digital trends, administrative constraints, or asset concentration are as many elements that impacted the asset management sector the past year. Legitimately, many insiders are wondering what is going to happen in 2015? Inspired by the 2015 wealth management predictions released by Capgemini, here are 7 trends to focus on this year.
Digital trends, one step further
No surprise here, 2015 is going to be digital. This exponential trend is affecting our activity every day more and heavily changing client’s expectations and needs. Today, individuals are enjoying digital solutions (smartphones, tablets etc) and it directly impacts the relationship they have with their asset manager. HNWI are showing needs that have to be satisfied instantaneously by digital tools redesigning the role of asset managers. “Everything, now” could be the new slogan of the wealth management industry in 2015.
Advanced analytical models
This second point appears as a direct consequence of increasing digital customer’s habits. The new technological and connected tools available on the market are becoming a way to access to portfolios anytime and anywhere. This direct and immediate access highlighted a new activity that could be called “direct consulting”, today more important than ever. Concretely it means that any client should have in his possession all information available at a precise moment in order to take a fast and accurate decision. Consequently, asset management companies are massively investing in analytical models that can generate a huge amount of information at a given moment in time.
Automation of processes
Following the emergence of modern digital solutions, the asset management sector is evolving from a manual activity to an automated business. Most of the oldest asset management companies couldn’t overcome this technological phenomenon and were slow down in their growth. Consequently, it opened a real and huge breach in the market as client’s needs couldn’t be answered by companies that did not have the internal competencies to satisfy them. As a direct consequence, many unknown outsiders took advantage of this postulate in order to enter an industry they did not mastered at all. They ceased this market weakness as an opportunity by developing their working habits on an archaic sector. And it worked perfectly. Indeed, we estimate that over 200 billions of dollars will be under control of « bots » in the 3 coming years. It is thus vital for wealth management companies to adapt and to follow these new trends.
Costly and binding administrative tasks
While clients are requesting higher flexibility, asset management companies are today submitted to a stifling regulatory environment. Thus, they need to review their whole organisation. Indeed, reporting and compliance tasks are heavy to fulfill and represent an important part of their budget. Here is the current paradox of the asset management industry. On a side we encounter clients having needs that have to be satisfied immediately and on the other one asset management companies that are submitted to rigid norms slowing them down in their actions.
All the regulations approved or being validated mixed with a new asset management industry submitted to the digital pressure directly lead to the concentration of assets under management. Indeed, it directly reduced the amount of players on the market. In 2015, we can guess that this trend is not going to disappear: small asset management companies are struggling and fighting for survival. Mergers and acquisitions, strategic repositioning, getting rid of non-strategic business units are drastically increasing.
Outsourcing: the path for glory?
Outsourcing proved that it could be a serious and interesting strategy to cut costs on a side and to improve quality of services on the other one. In fact, this practice is a way to get rid of low added value tasks in order to focus on core activities. Many asset managers have already successfully tried this strategy outsourcing front and back office tasks to external service providers.
The Cloud, new strategic tool
In a constantly changing environment and a more and more competitive sector, mastering costs is becoming a major issue for asset management companies. In order to optimize costs, it is likely that old and costly IT solutions could be replaced by the Cloud in a coming future. Another advantage of this solution: it would also free up time for managers so that they can focus on core tasks.