TB: Have you ever considered what the Investment Management industry will look like in 20 years’ time? Nobody can predict the future but one thing is clear, it will be very different from today. The pace and complexity of change is overwhelming and it will only increase.
We have been tracking a number of deeply rooted forces – megatrends – that we believe will help shape the future of the investment management industry. Demographic changes, technological advancement, change in the environment and evolving social values and behaviours.
An ageing population, combined with low birth rates, low savings rates and high levels of fiscal debt are creating a growing retirement burden which is shifting increasingly to the individual.
The growing middle class in many developing countries is increasing demand for savings solutions.
The digital revolution continues to impact on almost every aspect of our lives creating new opportunities and disrupting existing models.
The increasing speed of technological advancement, growing ubiquity of technology, explosive growth of data are perhaps the pervasive examples. Resource insecurities are changing the nature, structure and timeline of investment opportunities.
Generational sifts are driving demand for immediacy, transparency and personalisation. Communities are developing and expanding and peers will become as important as providers for many.
We believe that the confluence of these trends will change the needs, behaviours and requirements of investors of the future. The clients of tomorrow are likely to be very different from the clients of today. The presents significant opportunities for the industry but also unprecedented challenges and raises a number of key questions for executives.
IS: We believe that investment managers can play a broader and deeper role in clients’ lives and the industry value chain. In the future, we believe that the industry will need to provide solutions, protection, information and education to a much broader client base crossing as many as five generations, spanning a much broader geographical reach and with a considerably different gender balance.
If the industry can leverage data to understand better its clients, get closer to them and work in partnership with key intermediaries, it can in our view become much more relevant through our investors’ lives, not just as they save for retirement which is too often the case today.
Traditional products will increasingly become components of broader, more flexible solutions. We will also see a greater demand for certainty of outcomes, investment niches becoming more mainstream, and the current approach to investing may change radically in the new world.
And if the industry is to aspire to support a wider client base with valued-added services, it will need to rethink its operating model, rather than investing in fixing the legacy of the past and problems of today, investment managers will need to invest for the future. They will need to design and create new platforms with the flexibility, scalability and functionality required to support a much more diverse client base.
TB: We are publishing our thinking to stimulate discussion and debate in the industry. I encourage you to delve into our report and think about how megatrends will drive change.
What do you think the future holds for investment management businesses?