Prediction versus reality: Is asset and wealth management shaping up as we expected?
It’s now six years since we launched our first Asset and Wealth Management (AWM) Revolution report, which set out our perspectives on the likely shape of the industry in 2020 and projections for growth in assets under management (AuM). Which predictions have materialised, which haven’t and what has been the impact on the strategic direction of AWM?
So much has changed in 2020 that 2014 seems like a lifetime ago. But even back then, it was clear that AWM was on the cusp of transformational change. Our 2014 industry projections not only anticipated phenomenal expansion in AuM, but also a shake-up in areas ranging from investment allocations to fee models and client expectations.
Were our bold projections and predictions justified? In AWM: From a brave new world to a new normal, we compare our original forecasts with what’s transpired since and what these developments mean for business and operating models within the industry.
In 2014, our forecast model projected that AuM would top US$101.7 trillion by 2020. In 2017, our analysts revised this up to just over US$111 trillion. Even with the disruption of the past year, AuM is set to surpass our expectations by the end of 2020.
AuM growth has been bolstered by the proliferation of low-cost passive products and investment in alternative asset classes. We’ve also seen an upsurge in interest in environmental, social and governance (ESG) conscious investment.
Outcomes matter
As we expected, active, passive and alternative allocations have become the building blocks for multi-asset, outcome-driven solutions. Alternatives have assumed much of the alpha mantle, while passives take on the beta. Increasingly, the expected outcomes now also include ESG.
Buyers’ market
We also anticipated that a combination of competition from passives and heightened investor and regulatory scrutiny would lead fee levels and models to be challenged. This need not be a race to the bottom on fees. But your business must deliver demonstrable value for money to stay in the game.
Technology do or die
Even in 2014, it was clear that digital transformation was emerging as a mission critical priority. This isn’t just about efficiency and cost. The AWM organisations out in front are harnessing advanced digital capabilities to sharpen decision making, widen their market reach and develop a more intuitive, responsive and compelling customer experience. Slower moving competitors are at risk of being side-lined.
Funding the future
AWM is playing an ever stronger role in business lending, funding infrastructure development and providing retirement solutions. The disruption of the past year is set to accelerate this trend still further.
Wide of the mark
What we overestimated was the extent to which a new breed of global asset managers would emerge and distribution would be redrawn as regional markets became more integrated. If anything, trade tensions and the retreat from globalisation are pushing in the opposite direction.
Looking ahead
The key trends reshaping the AWM industry have picked up massive momentum in the turmoil of 2020. In AWM Revolution: The power to shape the future, we take the story forward by showing how the industry can boost growth still further, while exerting its influence as an engine of recovery and force for good.
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