The future of asset management will either be entirely virtual or a hybrid model that features a mix of in-person and online contacts. Either way, the old way of doing business seems to be gone for good.
In a december article, Oliver Wyman authors and partners Julia Hobart, Joshua Zwick, Dennis Zhang and Kamil Kaczmarski outlined ten trends they believe will shape the asset management industry in 2022, including the shift to a work model virtual. According to the article, research conducted by the company before the Covid-19 pandemic indicated that a fully virtual asset manager – an asset manager that would eliminate in-person office contact with clients – could reduce the manager cost base of about 40%.
While Hobart, Zwick, Zhang and Kaczmarski admit that most managers will eventually switch to a hybrid way of doing business, they argued that some “pioneers” will take the virtual leap, which will not only allow them to do business. reduce costs, but also allow them to offer better service to their customers. “There is broader pressure in the industry to cut costs,” Zwick said. Institutional investor. “If the growth markets have helped [float] all boats, there is an underlying fragility in the business model. As a result, managers focus on how to operate more efficiently.
Zwick said many managers spend significant capital on customer service expenses, including travel and entertainment. Over the past two years, these expenses have largely dissipated, allowing managers to pass the savings directly on to their company’s bottom line. The question now is whether these savings will simply stay in-house or eventually be passed on to customers.
“I think the jury is still out on it,” he said. “But with the pressure on asset managers to generate net fee performance and the scrutiny of the amount of fees charged, it wouldn’t surprise me if the power really rests with the investors rather than the managers. . And then, at the end of the day, the benefits of a more remote or virtual operating model would trickle down to customers, instead of being captured by asset managers. The markets are simply too competitive to suggest otherwise.
While a virtual model can help managers cut costs, Yariv Itah, managing director at Casey Quirk, part of Deloitte Consulting, said cost is not a primary motivation when it comes to change the way they do business. Instead, the leadership teams that Itah and his colleagues have worked with since the start of the pandemic have focused more on the sustainability of their business models. The general consensus, he said, is that most companies view a hybrid model as the most viable way to maintain the culture of the investment team. And, although the definition of a hybrid model has changed during the pandemic, Itah said most managers now define it loosely as “we’re not going back to where we are today. ”
“[Asset managers] primarily focus on how the hybrid approach will change culture, ”Itah said II. Much of the value, they believe, comes from two sources: [unstructured] the interaction between members of the investment team … and teaching the next generation. ”
The asset management industry certainly seems poised for a digital shift. In September, KPMG published a survey in which 75% of respondents in the asset management field indicated that they had a strong appetite for digital transformation, Institutional investor Previously reported. But in an Accenture survey released in October, which included 100 senior asset management executives, 68% of those polled said they thought their company was reluctant to adopt new technology.
Zwick agrees that asset managers are concerned about culture and collaboration. Specifically, he thinks they are primarily concerned that an all-virtual model may undermine the team-centric culture of companies. “Asset managers don’t want the culture to dissipate,” he said.
But he also argued that the ideas he and his authors present in the article can serve as a healthy challenge to the status quo and a reminder that there is always a better and more efficient way for managers to execute their mandates: “[Managers] think outside the box… must challenge those assumptions, ”Zwick said. “The possibility of collaborating in a virtual environment is actually much higher and you can involve a wider range of people. “