Trustee and Fiduciary Services Global Asset Management Industry Insights

Prime, Futures and Securities Services 6 ASSET MANAGEMENT EVOLUTION The asset management industry continues to evolve amid increasing regulation, advancing technology and rising political uncertainty. For those who are looking for ways to progress in such a volatile setting, remaining stationary just isn’t an option. So we asked a range of industry participants to identify the main challenges that they see to asset management over the next 3 to 5 years (picking three options). In ranking these challenges, we see that 80% chose further cost compression as the number one issue, followed by 51% choosing new regulations and cyber-crime as joint second issues. To give you a further indication of the importance that asset managers attach to a wide array of issues, regulatory divergence polls at 47%, geopolitical uncertainty at 45% and fintech at 24%. This spread of responses demonstrates the multiple fronts on which the industry needs to operate to continue moving forward. What do you see as the 3 main challenges to asset management over the next 3-5 years? Q1 51 % New regulations 51 % Cybercrime 80 % Further cost compression 45 % Geopolitical uncertainty 24 % Fintech 2 % Other 47 % Regulatory divergence It’s not surprising to see that further cost compression ranks highest, as margins are being squeezed as a result of industry competition, but also by paying for fines and the cost of implementing regulatory change. In order to respond, innovation is key and a number of asset managers have identified new fee models to mark themselves out from the crowd. One example is seen in the US, where there are proposals for negative-fee ETFs. There is also evidence of global innovation being applied to how asset managers charge fees, which ranges from switching to fixed fees irrespective of fund size (rather than paying a percentage of assets under management) to charging a performance fee but no asset management charge to demonstrate the worth of their active management. The battle for market share doesn’t abate, nor can it, as asset managers face continued challenges to their survival.