The wealth management sector is changing. Sooner rather than later, market participants will face a dramatically altered landscape.
While most people are aware of the broad direction of change across the globe, and many of the evolving themes have been incorporated into investment strategies already we believe the implications – for investors and asset managers alike – need to be more fully explored.
At KPMG, we believe that the future for the investment management industry is very positive and yet to capture the opportunities presented it will have to overcome unprecedented challenges.
The megatrends – the drivers of change
We have identified four global megatrends which are set to transform the investment management industry. They include changes to demographics, the environment, technology, and social values, behaviour and ethics. The spectrum of outcomes is broad and there is certainly no 'one-size-fits all' response.
"The megatrends have the potential to significantly impact the investment management industry of 2030. However the highly interconnected and interrelated nature of these trends is likely to magnify the overall ramifications for the industry."
National Sector Leader, Wealth Management
A shift in demographics will not only magnify the need for effective investment management but, over time, will radically change the nature of the challenge and an investment manager’s potential client base.The environment
Resource insecurities are changing the nature of investment opportunities and demand for risk protection, as well as increasing the importance of socially responsible corporate behaviours and investment strategies.Technology
Technological developments continue to act as major drivers of social, economic and environmental change, creating new opportunities and disrupting existing business models.Social values, behaviour and ethics
Technology and the internet have combined to revolutionise how a large proportion of the world’s population interacts, communicates and behaves.
Implications for investment management industry
We believe the confluence of megatrends has the potential to have a profound impact on the investment management industry and that it will look very different in 15 years time. It is likely the industry will be significantly larger and have a more important role to play in society than today. However, many investment managers will need to drastically change their value proposition to remain relevant. We believe that there are seven core elements to capturing long term, sustainable and profitable growth:#1 – Value chain
There are significant opportunities for investment managers to play a more important role in clients' lives and the industry's value chain.#2 – Clients
The clients of tomorrow are likely to be very different from the clients of today, both in terms of who they are, where they live and what they expect from the industry.#3 – Products and brands
Traditional products will increasingly become components of outcome-orientated solutions, niches will become more mainstream and aspects of investment theory may be called into question.#4 – Market
Globalisation will continue to open up new opportunities for the industry and may necessitate a fundamental review of asset managers' market footprints and market entry strategies.#5 – Technology
As the pace of change increases, asset managers will need to transform their operating models to create more flexible, efficient and agile platforms.#6 – Governance
Asset managers need to create an organisational structure which can adapt and handle the complexities created by further geographic expansion.#7 – People
The challenge associated with the search for and retention of talent will intensify.
We firmly believe that the megatrends will drive fundamental changes in what investors of the future need, want and expect. This cannot be ignored and is likely to require a significant reshaping of the industry's model. In our view, simply appreciating that this shift is taking place and pursuing a strategy of incremental change will for many not be sufficient.
Learn more about the global megatrends that are reshaping the investment management industry and the potential impact for your business by downloading Investing in the future.