In the race to a digital future, asset management firms will automate, harness data, gain insight from analytics, and provide a personalized customer experience, among other things.
FREMONT, CA: The asset management industry is undergoing significant transformations, which the coronavirus outbreak has exacerbated. Many of the industry's developments were already in motion before the pandemic, but with social distancing, operating from home, and on-demand connectivity thrown into the mix, asset management firms must adjust or risk falling behind.
The following are four main developments that will shape the asset management industry in the future:
With their latest technologies, are asset management companies prepared for the future? The pandemic has brought to light—and accelerated—the industry's potential for technological transformation. In the race to a digital future, asset management firms will automate, harness data, gain insight from analytics, and provide a personalized customer experience, among other things. The consequences for companies that do not keep up are serious, posing an existential threat to their operations.
Digital Transformation and Controlling Costs
Controlling costs is a top priority for long-term sustainability. In certain situations, this goes hand in hand with adopting emerging technology that automates previously manual activities. Businesses must also consider outsourcing's steady rise: the concept of doing what one does best and delegating the rest to others. In an increasingly competitive world, the end result is a rapidly changing business model that allows fund managers to control costs and pass the savings on to their clients.
Liquidity and Balance Sheet Strength
The value of balance sheet strength and liquidity problems has been highlighted in the current market climate. Firms that were already financially stable would be able to profit from business disturbances caused by the pandemic. On the plus side, businesses will be able to gain new clients and expand the revenue base. What is the drawback? Without the funds to spend, opportunities are lost.
Pressure on Fees
It is known as the ‘Race to Zero.’ Asset managers and brokers have been on a never-ending quest to reduce rates since regulators abolished fixed trading commissions in the 1970s. Customers today have alternatives to the conventional wealth management business model, which charges fees as a percentage of assets. More businesses are now providing clients with the option of being paid by the hour or a flat rate for their services. This does not include the emergence of so-called robo-advisors, which provide services for extremely low fees. As a result, asset managers must now more than ever demonstrate their importance to clients.