Rebooting the global asset management industry

Rebooting the global asset management industry 25 Some of these investors are active traders and also avid investors in digital assets – like Bitcoin and Ethereum – thus paving the way for institutional investors to experiment with digital assets. Others tend to rely on their personal values and insights when making investment decisions. As buy-and-hold investors, they invest in themes that are singled out as the key sources of value creation. These aim to override market cycles in the global economy now buffeted by geopolitical risks that are hard to model and manage. As such, the focus is on outcome- oriented products that can deliver multiple goals within a single wrapper (46%). Currently, the key chosen theme is sustainability that prioritizes environmental and societal factors on top of financial returns with a distinct intergenerational focus. This applies especially to retail investors in Asia Pacific, Europe and North America. They demand an impactful client experience that is natural, seamless, intuitive and user friendly – using interactive tools and mobile phones. This is at variance with the dominant one-size-fits-all approach in the retail space. They also want to be able to go beyond the traditional top-down and bottom-up analysis to assess risk factors, their probability and ‘what if ’ scenarios when making investment choices. In response, a number of asset managers are shifting up a gear and starting to adopt the ‘Buyer 2.0’ model, in which clients are hungry for insights yet still able to cover many of their investment needs in their own time without external human help. This new generation of clients is now transforming the retail landscape aided and abetted by technology. They are expected to be the main drivers of top-line growth in this decade. In parallel, regulators are ensuring that these opportunities come with guardrails via enhanced fiduciary responsibility on the part of asset managers (see Insights). Regulators are ensuring that these opportunities come with guardrails via enhanced fiduciary responsibility on the part of asset managers. Insights The NextGens will shun the one-size-fits-all approach The newly emerging major client segment – often called NextGens – are expected to be sophisticated in their investment choices, well informed about market developments and technologically savvy in using digital tools to meet their investment goals. Rather than an array of product offering, they prefer a holistic one-stop-shop solution. Financial returns matter to them. But just as important are longer-term relationships that support wealth preservation and inheritance planning. The NextGens see themselves as the stewards of their family’s wealth and seek to preserve and grow it responsibly. They expect their asset manager to provide digital tools that enable better data analysis and offer predictive analytics that enable clients to do their own scenario planning and construct their own portfolios. Engagement that permits a deeper understanding of clients’ goals and risk tolerances is highly valued, as is transparency around investment process, asset valuation, and fees and charges. In the past, it was possible for asset managers to push their own in-house products, limiting choice for clients and giving rise to conflicts of interest. Clients have nowwisened up. They want to see clear line of sight between their investment goals and product suitability. They favor a fee structure that delivers value for money rather than a fixed percentage fee. For the NextGens, the burden of proof has shifted. We have to convince them that we are a worthy partner in their investment journey. We have invested a lot in people and technology to achieve a step improvement in three areas: investment returns, alignment of interests and client engagement. That’s the only way to remain relevant in a fast- changing landscape. A Swiss asset manager “Client experience is about delivering bespoke solutions that also provides proactive investment ideas and financial education.” “Improved transparency has become a cornerstone of success in attracting a new generation of clients.” Interview Quotes