Asset Management

Five Ways Asset Managers Can Win

Matthew Caulfield, June 10, 2021

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The author of this article spells out a series of steps that wealth and asset managers can take to remain competitive.

Words such as “innovation” come easily in commentaries and business conferences. But having the right framework to come up with creative change can be hard. Business leaders have to make an environment that encourages innovation without neglecting core functions. They need to make time – always difficult in a busy organization – and give people room to fail (since how else can one learn unless mistakes are made?)

In this digital age, data needs to be used intelligently so that innovation happens in ways that meet real needs and in ways that can be measured accurately and fast. Data can show whether a fund manager is rolling out products that clients actually want. Firms must avoid the dangers of fashion, of trying to chase the latest fads. In this era when everyone appears to be talking about ESG investing, to give one example, this is an important point. Time is money and using data cleverly to work out what clients truly want can save hours in developing potential duds.

Matthew Caulfield, executive vice president, tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

During the recent 2021 MMI Emerging Asset Management Forum, I had the opportunity to hear from some of the best in the industry say how they’re positioning their businesses to thrive in the year to come.

One theme arose early and often. After successfully navigating one of the most tumultuous years in history, most emerging asset managers aren’t slowing down. In fact, they’re mapping out a pathway to reach their next phase of growth.

The past year has been defined by disruption. Competition among asset managers intensified, M&A activity was quite active, the regulatory landscape continued to shift, and new technology altered the playing field. Remaining competitive in this environment will require innovative thinking, new tools, and a growth mindset across the front, middle, and back office.

Without question, 2021 presents plenty of opportunity for growth for emerging asset managers, many of whom are newly energized and ready to take on initiatives that will propel their business forward. As I look forward, here are five keys to growth I’ve identified for today’s emerging asset managers. 

1. Commit to a mindset of innovation 
The asset management industry is constantly evolving as investor appetites change and new products come to market. To stay competitive, managers must move beyond existing routines and approaches that have worked in the past and embrace innovation. Real innovative thinking has to be intentional and consistent. 

This means creating task forces with time set aside dedicated solely to innovation. Asset managers can benefit from expanding beyond their organization and leaning on technology and operations partners, proven industry groups, and thought leaders to develop insights on the industry’s future. Doing so will help build a culture of innovation across the firm and create space to adopt new approaches.  

2.  Make data-driven product innovation decisions
Despite collecting and storing a massive trove of enterprise data and information, most asset managers today are still flying in the dark when it comes to making data-informed business decisions. By adopting data analytics tools and expertise, asset managers can tap into enterprise data, better measure which investment products are driving profitability, and create a data-informed product roadmap for future capital investments. These analytics should be augmented with honest and ongoing conversations with distributors, service providers, and other key stakeholders to build a smart, forward-looking strategy that combines actionable data and real-world insights.  

3. Fully embrace customization and ESG 
Demand for customized individual portfolios will continue to rise in 2021 as Environmental, Social, and Corporate Governance (ESG) products grow their foothold in the market and younger investors with an appetite for customization gain wealth. As such, the market will continue to react and asset managers providing a high level of individual portfolio customization will become the norm, not the exception. Product customization has long been predicted as the future of investment management. But providing it at scale in a way that minimizes cost and operational burden is a puzzle few asset managers have solved. Technology is a key component of offering customization at scale, but it is essential that asset managers find a partner in the market with the proven ability to ease cost and operational constraints.

4. Modernize operations with tech-enabled flexibility and agility
Getting new products to market quickly will define the winners of 2021 and beyond. Doing so requires an enhanced operational infrastructure that allows asset managers to quickly and effectively deliver investment strategies in packages that satisfy distributor and end investor demands. Whether it be an ETF, SMA, or mutual fund, firms must be able to adapt quickly and provide their investment strategy in the desired package. So a pre-emptive reassessment of the firm’s operations is needed. Frictionless collaboration between technology teams and product and marketing teams will allow the firm to respond quickly to changing investor demands and is an essential component of an agile and flexible operational structure.  

5. Leverage artificial intelligence and machine learning 
According to a new report from Accenture, nearly 85 per cent of asset management firms are actively using artificial intelligence and data analytics in their investment process. These innovative technologies are being applied to power better research, reporting and attribution, investment decisions, and trading functions in ways that can reduce costs and efficiency. While it may not be essential to master the application of artificial intelligence and machine learning immediately, asset managers that lay the groundwork to leverage these capabilities will be positioned ahead of their competitors. 

Don’t travel alone
After such a volatile year in 2020, creating a roadmap for growth and deciding where and how to allocate resources are difficult tasks. Technology and operations support is one area that will remain critical to any manager seeking growth. The pathway to growth is a winding one, but asset managers do not need to navigate it alone. Selecting a partner that’s dedicated to innovation and complements your sales and product expansion plan will help your firm reach its growth goals.

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