While they are confident about their immediate business prospects despite a fragile global economy, CEOs of the world’s major asset management firms are alert to the need to adapt their business to reflect customer values and expectations, environmental risks and transformational technological change.
Asset management CEOs expressed low confidence in the global economy (54 percent) but they are highly optimistic (93 percent) in growth for their individual firms.
Looking afar for growth
Unsurpringsly, asset managers are turning their attention overseas in pursuit of growth, with 63 percent listing emerging markets as their biggest priorty for geographic expansion in the next 3 years. More than half are also prioritizing geographies that form part of China’s Belt and Road Initiative.
We predict strong ongoing industry growth thanks in part to the growing pools of capital from investors who are living longer and saving for retirement.
Environmental/climate change risk, disruptive technologies and a return to territorialism were ranked the top threats to company growth. Specifically, 68 percent of CEOs agreed that their organizational growth will be determined by their ability to anticipate and navigate the global shift to a low-carbon, clean technology economy.
In terms of day-to-day challenges impeding organizational growth, asset management CEOs highlighted issues related to talent acquisition, innovation and process improvement and their ability to respond to disruptive forces. More than two-thirds (68 percent) of CEOs believe it’s critical to be agile or else they will face irrelevance.
Asset managers are definitely feeling the pressure to innovate, to be more adaptable and agile under shifting makets and the need to be more responsive to investor demands than in the past.
Investors are increasingly looking to create societal value beyond current financial value.
In addition to industry imperatives of becoming more digital and data-driven to improve customer-centricity, asset managers see the need to invest in technology to improve their operational efficiency, increase their scale, and begin to take advantage of the “adjacent plays” between asset and wealth management.
The drive to customer centricity is also fanned by increased regulatory pressure for asset managers to take greater responsibility for their end consumers. Asset managers are prudent to pursue greater collaboration with their distributors to share customer insights and build relevant and seamless products and service delivery.
Regardless of asset manager’s motivation, they face an uphill challenge engaging more closely with the end investor based on the traditional value chain model by which distributors closely guard their relationship with the consumer.
Facing growth challenges from multiple fronts, asset management CEOs are increasingly placing emphasis on driving operating model transformation, with 83 percent actively transforming their leadership team to strengthen resilience and 81 percent personally leading their organization’s technology strategy.
Asset managers are asking themselves what is really core to their businesses, after years of building home-grown systems and attempting to differentiate their front, middle and back office. It is forcing the c-suite to actively examine their aging legacy systems and look for technology architecture that can make them more nimble to react to market needs.
Although asset management CEOs articulated a strong willingness to driving internal technology change, our survey found much less enthusiasm about their current ability to lead meaningful industry disruption.
68 percent of asset management CEOs think it’s critical to be agile or else they will face irrelevance.
Many asset management companies are taking solid steps forward to address some of the gaps in their digital capabilities. Nearly half (49 percent) of CEOs plan to upskill more than half of their workforce over the next 3 years.
The pressing issue of cyber resilience is no doubt pushing these investments forward, since 67 percent of CEOs believe that becoming a victim of cyber attack is inevitable. Further, 20 percent of company CEOs acknowledged that they are under-prepared for an attack.
Identifying the shifting risks and opportunities, asset management CEOs are taking a fresh look at their own roles, priorities, and skills required to propel their firms forward.
Customer experience is at the top of CEOs’ list, with 67 percent of executives stating that building customer connections is paramount and affirm a personal responsibility for ensuring that their organization’s ESG politices reflect customer values.
A majority (72 percent) also state that protecting customer data is among their most important responsibilities to grow the company’s future customer base. However, 49 percent of leaders admit that investments made to date in personalizing the customer expeience have not delivered the growth they hoped for.
The industry is changing dramatically, CEOs must now be more attuned to changing customer demands, skilled in customer distribution, technology and new markets, and possess a strong understanding of risk management and operational matters.
As asset management CEOs push themselves to rise to these new leadership challenges, they know they cannot wait to respond to the shifting marketplace before them. The time is now, to make strategic business decisions to turn these new opportunities into strong and sustainable growth.
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