- Client bases will be fundamentally different by 2030
- Number of players in the global market will halve within 15 years
- Asset managers are behind the curve on embracing new technology
- Big tech companies like Google and Amazon are well-placed to make moves into the sector
The global asset management industry will radically transform over the next 15 years due to seismic shifts in client demographics, technology and changing social values and behaviours, according to KPMG.
A new KPMG report,Investing in the Future, predicts that by 2030 the client base of a typical asset manager will be completely different to today’s, as generation X approaches retirement, generation Y matures and middle classes in emerging countries grow. KPMG warns that current business models will not be fit for purpose.
Tom Brown, global head of investment management at KPMG, commented: “We are on the verge of the biggest shake-up the industry has experienced; and the message to asset managers is clear – adapt to change or your business won’t survive. The two biggest issues that need to be addressed are the changing client base and technology. Asset managers need to get to work on these areas now.
“It is no longer just about attracting the clients who are armed with cash and ready to invest. The successful asset managers of tomorrow must focus on building cradle-to-grave relationships with a dramatically different and more diverse client base from today, which includes much younger investors. They must also be mindful that women are increasingly controlling a bigger share of family wealth.
“Demographics are changing. People are living longer and taking greater responsibility for their own retirement planning. Younger generations will save more as they see their parents run out of money in retirement. We also expect to see a significant boost of new money from the growing middle classes in China, Mexico, India, Nigeria and other developing economies over the next 15 years.
“There is a huge risk that the global economy can’t grow fast enough to absorb the volume of savings needed to fund the needs of an ageing population. The asset management industry undoubtedly has a huge role to play in this broader savings debate.”
The report also highlights the importance of technological investment and warns that businesses are currently focusing on the wrong areas.
Ian Smith, financial services strategy partner at KPMG, commented: “Technology plays a critical role in the industry’s future. The clients of the future will be fundamentally different in terms of their needs and expectations. They will demand more personalised information, education and advice that will require asset managers to radically address their technology capabilities to really understand their clients and support this level of service.
“Asset managers still have a long way to go to recognise and exploit big data and data analytics. While IT is already attracting a significant amount of investment, it is not being channelled into the right areas. Businesses are putting their efforts trying to unpick the complex legacy of disparate systems and technologies, while trying to ensure that they provide the right level of control to meet increasingly stringent compliance requirements. There is too little focus on building the architecture to meet the business needs of tomorrow. Platforms will need to be completely redesigned with the flexibility to support a much more diverse client base and deliver a step change in costs, control and client experience.
“There is enormous opportunity for non-traditional players which, when combined with continued pressure on margins and the search for capabilities, will kick-start a wave of M&A activity. New entrants, who aren’t plagued by legacy issues and outdated clunky systems, will thrive as they can move quickly to implement more relevant digital and data strategies. Trusted brands that resonate and appeal to a more diverse client base, as well as the younger generation, may be able to build scale quickly. We could see the Apples, Googles or large retailers of the world becoming the next big powerhouses in investment management. As such, we expect to see mass consolidation in the industry and predict that within 15 years there will be half the number of players currently in the market.”
The report also predicts that most people will buy investment products on-line rather than through a face-to-face adviser. Customers will also buy based on their own research supported by crowd-sourced opinions on ‘TripAdvisor type’ websites.
Ian Smith concluded: “The growing relevance of online communities and social networks is changing attitudes and behaviours. Consumers are increasingly looking to ‘people like me’ rather than professionals for advice, guidance and direction.”
Notes to editors: Investing in the future Report (PDF 2.7. MB)
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KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.