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  • Introduction
  • How has the ExCo evolved?
  • The ExCo
  • Key themes

The evolving role of leadership in wealth and asset management

How has the ExCo evolved?

5-10 years ago
5-10 years ago
now
Now
5-10 years from now
5-10 from now

The ExCo

CEO

CEO

COO

COO

CIO

CIO

CTO

CTO

CFO

CFO

C?O

C?O

What is top of the ExCo agenda?

Societal role

Societal role

Revolutionise for scale

Revolutionise for scale

Alternatives – the new norm

Alternatives – the new norm

Client centricity

Client centricity

Extraordinary change and a new pace for the next chapter of the industry

Intro image

The wealth and asset management industry has been evolving at pace for the last decade; we consistently hear about the next inflection point or revolutionary moment. Whilst there have been a lot of false dawns, the fundamental drivers of margin erosion, increased competition for product shelf space and ever-changing investor demands still remain. Layer this with a combination of wider socio-political factors, including Brexit, climate change and an unprecedented pandemic. This results in a rapid acceleration of shifts that were already underway, albeit less magnified.

We have spoken to leaders from across the industry to gain a personal perspective on how the macro changes in the industry have impacted the role of wealth and asset management leadership, and shaped their own roles and goals. We have initially met with CEOs, COOs, CIOs, CTOs and CFOs, which have highlighted interesting themes of commonality. This is our first wave of findings, and we will be evolving conclusions and insights by extending interviews to other leaders and members of the Executive Committee (ExCo) in the coming months.

Hearing first-hand what is at the top of the collective leadership agenda today, while reflecting back and looking forward, has been an insightful journey to delve into – seeing the transformational shifts and possibility when market drivers force the hand of change. The focus is firmly on revolutionary technology advancements, client centricity at the heart of the enterprise and the search for alpha by expanding capabilities, for example into alternative asset classes. The most notable change is the true awareness and appreciation of the crucial role that wealth and asset managers must play in the wider society, alongside their fiduciary duty to their clients. There is a real sense of motivation and urgency amongst the leadership within the industry to step up, do more and deliver a positive impact. The industry is moving beyond pure profit-making and economic growth, and sharing the asset owner beliefs of driving global societal impact and building a sustainable future for tomorrow and future generations.

Ben Lucas
Partner
UK Head of Wealth and
Asset Management Consulting
Fran Hollas
Senior Manager
Wealth and Asset Management

The journey of ExCo evolution as the industry and enterprise has shifted

It comes as no surprise that the focus of the modern ExCo is dramatically different from the historical focus – every generation of leaders has brought with it a new increment of digital and innovation-first mindset. In our data gathering exercise and interviews, we asked participants to highlight the top three words that they most associate with ExCo focus, looking across each decade. A key observation is that focus areas 10 years ago have not disappeared. In fact, the breadth and depth of priority items continues to expand:

ExCo representation has, and continues to evolve, ensuring a broader voice

Leadership teams need to adapt to match the changes the industry is facing and ensure that there is right connectivity at the top of the house. Click on the roles below to find out how different roles have evolved, and look out for more results and insights as we expand our survey to Chief Risk Officers (CROs) and Chief Compliance Officers (CCOs).

CEO

CEO

COO

COO

CIO

CIO

CTO

CTO

CFO

CFO

C?O

C?O

The Impact Assessor and Negotiator

The Collaboration Facilitator

The Fiduciary Steward

The Business Enabler

The Analytical Predictor

CEO's have seen an increased focus on their external responsibilities – advocating for the industry and leading proactive engagement with government and policy makers
CEO, Global Asset Manager
COO's have seen a shift from simply running the organisation to transforming the organisation, playing a key role in driving and challenging the strategy
COO, UK Asset Manager
The greatest shift in the CIO responsibility is the emphasis on stewardship of client money...performance is no longer enough
CIO, Global Asset Manager
The CTO is now a key role on the ExCo – enabling competitive positioning, acting as the guardian of enterprise security and guiding the business to achieve their vision
CTO, UK Asset Manager
With the quantum of uncertainty in the industry, strategies need constant re-testing and CFOs are now being asked to generate valuable insights and predict the future
CFO, Global Asset Manager

Chief Executive Officers (CEOs) are the power figure at the top of the organisation, leading by example and setting the tone on culture and ambition. They are responsible for looking at how the pendulum swings between different areas, ensuring all parts of the business are successfully integrated and empowered to achieve the strategic objectives of the firm. They have always had the responsibility of promoting the external profile of the organisation, and they are increasingly seeing their remit of responsibility increase to promoting and collectively steering the industry as a whole.

The key shift in their role has seen them spend less time focused on pure running of the business and an expansion of their external role, with a much greater emphasis on:

  • Actively representing and promoting the firm’s brand, values and culture in the market, presenting the firms best self. Culture, people and values are now firmly at the top of the executive agenda;
  • Being increasingly active in the political field, they are lobbying to raise the bar for the sector;
  • Driving societal change in topics such as ESG and Diversity & Inclusion; and
  • Continuing and increasing their proximity to clients and people than ever before

The Chief Operating Officer (COO) role is one of the most varied roles across the industry, when considering remit and responsibilities. There is a spectrum from expanded COO roles combining reporting lines and capabilities of finance and technology, to COO roles wholly focused on servicing investment, distribution and clients, with distinct CFO and CTO roles with their own seat at the table. Some of this is dictated by size and complexity of the organisation – as the industry consolidates further, we expect more alignment of the COO definition across firms.

The biggest shift in the COO role is the move away from simply running the organisation, to being a key cog in the wheel of transformation. They are:

  • Taking on more leadership responsibility from the CEO, with more autonomy in running the business;
  • More than just the person responsible for investment support and ‘making sure the trains run on time’;
  • At the forefront of decision-making – in today’s climate, an effective, scalable and controlled operations is central to the firm's success; and
  • Required to drive efficiency through innovation, develop operational excellence and agility and ensure the safety and resilience of the business

Chief Investment Officers (CIOs), a role which is unique to our industry, have seen their roles evolve whilst retaining their importance within the organisation. CIOs have always held an external profile for the organisation, alongside their critical focus on alpha generation, leading investment talent and making allocation decisions that drive performance.

The CIO role has expanded significantly, and the greatest shift of the investment function has been towards a more collaborative approach, both with clients and with other business areas. Investment performance will unlikely be the only measure of success in years to come. For CIOs, EQ is as important as IQ, and their roles are expanding across:

  • Actively leading in the firm’s societal responsibilities, externally demonstrating their position in supporting economic recovery and driving societal change;
  • Being stewards of client money, delivering stability alongside consistent, strong performance that aligns to investor short- and long-term life goals;
  • Co-creating solutions with clients, and building trusted advisor status by blending investment capabilities and understanding the holistic asset allocation needs of clients (not just those currently allocated with said manager); and
  • Driving scalability and client responsiveness in partnership with other business areas

There has been a significant shift in the role of technology within wealth and asset management over the last decade – as a result Chief Technology Officers (CTOs) have experienced some of the biggest changes to their roles. Historically, as Head of Technology, your main purpose was to support the running of the business, being engaged to fix or being given business requirements to deliver to. Now that technology is seen as the key to unlock a range of successes – scale, differentiation and profitability – the CTO’s position has evolved to one of critical ExCo status, often with their own dedicated seat at the table.

As organisations continue to move away from siloed structures to more integrated cross-functional teams that are client-focused and have technologists embedded within them, the CTO will continue to transition towards:

  • Acting as the talent exporter and technology coach across the organisation;
  • Being part of client conversations around new propositions and services – technology is now at the root of how new clients are attracted and new business is generated;
  • Being a strategic advisor providing key input into the strategy, with their increased accountability to the regulator giving them greater authority and reason to challenge; and
  • Having a closer relationship and business partnership status with areas across the enterprise

Chief Financial Officers (CFOs), and the finance function, have gone strides beyond being a financial control powerhouse – they are now key decision makers, integral to the prioritisation and sponsorship of strategic, enterprise-wide initiatives. In addition, there has been an evolution of the relationships between the CFO, COO and CTO, which were once separate and distinct but are now more integrated and linked than ever before. CFOs that have made progress have since gone beyond the role of finance business partners and have truly embraced the role of technology and data, not only in driving efficiencies but generating leading insights to inform key business decisions.

The level of change in the industry is now so vast that firms are continuously revaluating their strategies. There is now an even greater need to demonstrate shareholder value. With their unique viewpoint across the organisation, CFOs are seeing the need to:

  • Harness data and turn it into forward-looking, insightful views and stories that guide agile strategies – in essence, CFOs are now being asked to ‘predict the future’;
  • Attract market-leading talent and manage a workforce focused on ‘high-value analytical thinking’; and
  • Drive efficiency by leveraging technology and automation, as well as embracing intelligence (both human and artificial)

Who will be the next C?O

Over the past 10 years, we have seen new seats created at the ExCo table. As the industry continues to evolve and face changes in strategic priorities, we will continue to see different roles rise in prominence.

Four themes highlighted in our discussions with ExCo members

Our industry continues to face high levels of change. There were four recurring industry themes that the ExCo says are shaping the future of WAM. These are changing the dynamics at the leadership table.

Societal role

Managers have a real societal responsibility and ability to use their buying power to make an impactful change through engaging with companies they invest in

ESG needs to become part of a company’s DNA, otherwise they will become unviable

Managers need to:

  • Define where they can have a material impact
  • Ensure they have clear messaging around their ESG philosophy
  • Demonstrate to investors and other stakeholders the concrete actions they are taking

Revolutionise for scale

Managers have been in a continuous cycle of ‘chasing scale’, with majority of technology advancements being iterations of existing estates

Automation purely for efficiency could be seen as a race to the bottom – keeping up is no longer a viable option

Managers need to:

  • Invest significantly to leapfrog the competition
  • Become wholly paperless
  • Focus quickly on differentiators
  • Scale to bespoke

Alternatives – the new norm

Wider macro environmental change and an increase in investor sophistication is driving the rise of alternatives

This growth will fuel the level of M&A activity like no other decade has seen

Managers need to:

  • Build or buy new specialist investment capabilities
  • Evolve governance models to be fit for purpose
  • Ensure they can explain the risk/return profile
  • Prioritise the integration of operating models

Client centricity

Client centricity has expanded beyond client experience to an enterprise level, fundamental pillar of business strategy

Investment performance alone is no longer enough to retain clients

Managers need to:

  • Pivot the organisation to focus on client touch points and services attributable to new money and stickiness of assets
  • Focus on clients’ purchasing patterns and lifetime value
  • Use data-driven insights to identify early indicators and take action
close-modal
Societal role

The wealth and asset management industry is facing a seismic shift and a massive push for change, from the way that individual organisations operate to the brand perception of the whole industry. Recent global events and the critical importance of ESG shine a spotlight on wealth and asset managers and the role that they play in society. There is real motivation in the industry to step up to the plate and do their part.

Investors have a heightened awareness about where their investments are placed, and they are increasingly asking to see the impacts of their investments alongside financial returns. For sustainable finance, the die has been cast. Environmental, Social and Governance (ESG) and Responsible Investment is not merely an investment approach but a core part of your DNA – how you hire, operate and invest. It is your licence to operate and your opportunity to lead the industry rather than be an observer. With added pressure from their peers, and more importantly regulators, it is critical that businesses embed these criteria into their strategies and business model. Product strategy, investment process, investment technology, data architecture, marketing literature and distribution preferences all must quickly change.

However, a credible ESG strategy requires authenticity and must be aligned to the company’s values. It also must be focused. Managers should understand the ESG risks and opportunities unique to them, define where they can best have an impact and focus on executing against it. ESG is a broad topic so understanding where best to focus to make a material impact is critical. Those that don't will struggle to be able to communicate a coherent ESG strategy to investors, stakeholders and their people.

For the wealth and asset management industry, there is a critical opportunity and responsibility to use their significant buying power to drive real societal change, as well as support economic growth and activity in the broader economy. However, the approach shouldn’t just be about investment exclusion, but it should be about engagement and how to transform businesses and industries to be greener. There is a major paradigm shift happening in the industry. Organisations are realising their positioning and power to influence change, and that their purpose is to not only provide returns for investors, but to do so in a responsible and long-term way.

The industry has a privileged position, and alongside the beliefs of asset owners, wealth and asset managers can drive real change through the companies that they are invested into. Wealth and asset management is not just about making profit, it is about driving real societal impact and building a sustainable future.

Reach out to Jonathan Coates to discuss your ESG journey.

Jonathan Coates
ESG Practice Lead
Director, Wealth and Asset Management Consulting
jonathan.coates@kpmg.co.uk
KPMG in the UK
Alternatives – the new norm

The squeeze on margins and ‘outside-in’ pressure means that managers need to not only optimise what they do, but also build scalability into their various operating models and differentiate themselves in order to survive. Institutional investors and allocators show continued preference for fewer, larger strategic investment/co-investment partners. In turn, achieving a scalable operating model(s) is not just about driving better operating margins, but it is also about successfully attracting and retaining the assets, as well as sourcing the best investment opportunities.

As assets under management in private assets ticks upwards at faster rates of growth than public assets, the number of traditional asset managers vying for talent and skills in private equity, infrastructure, real estate, and debt also grows. Whilst differentiation is certainly about sourcing the right deals at the right time and creating the appropriate client products and solutions around them, successful execution is fundamental. This requires the right governance, people, processes, technology platforms and data capabilities to maximise value from the opportunity. The so-called ‘wall of money’ in private assets needs clear end-to-end channels throughout the acquisition, onboarding, monetising, running and exit lifecycles. Moreover, the potential ‘retailification’ of alternatives to distribute to a wider range of investor types, will add to the scrutiny and the need for managers to fully understand the underlying assets they run.

Typical challenges arise when bringing together the public and private market worlds – gaps in skills or knowledge in the middle and back office, or lack of robust governance frameworks and technology/data capability, risks the successful outcome of these differentiation initiatives. In addition, leveraging alternative data sources and having better data-led insights is ever-more a ‘must-have’ in differentiated decision-making. A number of leading data analytics solutions have recently emerged, but firms often struggle with where and how to take the first step in deploying these facilitators to extract the maximum advantage to their investment and distribution lifecycle. Traditional asset managers and allocators expanding their asset class capabilities, in particular across the private assets landscape, have an exciting opportunity to create real value for their underlying investors and clients; a nimble, agile approach alongside strong skillsets and targeted operating models are pivotal to achieving successful outcomes.

Speak to Zeynep Meric-Smith to find out how to differentiate your business.

Zeynep Meric-Smith
Partner,
UK Head of Private Assets Consulting
zeynep.mericsmith@kpmg.co.uk
KPMG in the UK
Client centricity

The concept of client centricity, while not new to the wealth and asset management industry, has certainly evolved from previous efforts purely applied to developing digital and front-end services for clients. Today, client centricity is considered as critical by every member of the ExCo – from the CFO and Heads of Distribution considering client profitability and behaviours influencing churn, to the CIO embracing a client-driven approach to co-creating tailored investment solutions.

Wealth and asset managers looking to differentiate themselves demonstrate a seamless cycle with continuous feedback that reflects an understanding of clients’ holistic goals. In addition, they have an ability to actively identify solutions and develop distinct products and services to remain market leading, while staying on the cutting edge of innovation.

Most have acknowledged the importance of the 360-degree client view to develop a multi-dimensional model of client engagement, purchasing behaviour, location, influence, churn and other factors – enabling the ability to run data experiments and deliver predictive next best actions.

This continues to be a work-in-progress, with mountains to climb in order to consolidate and analyse data, particularly across intermediaries and institutional clients, where the distribution layers limit transparency of the end investor, and true source of flows.

Personalisation and customisation are the holy grail, with opportunity to weave this into client facing portfolio tools, as well as digital distribution channels.

Increasingly, simply being a top performing house is no longer enough to win new customers, with newer demands for tailored services being central to pitches and RFPs.

Moving into the next phases of the ambition to achieve client centricity, managers are focusing on two key areas. Firstly, a new approach to considering client segmentations, moving away from simplistic, traditional segments to data-driven segmentation that develops client clusters based on similar patterns. Secondly, the deconstruction of the siloed operating model, and emergence of the integrated sales, client servicing and marketing organisation centred around client types will be critical in delivering a wholly client-centred experience.

Contact Ruby Paramanathan, who will be able to guide you through establishing and maintaining client centricity.

Ruby Paramanathan
Distribution Practice Lead
Director, Wealth and Asset Management Consulting
ruby.paramanathan@kpmg.co.uk
KPMG in the UK
Revolutionise for scale

The pressure on profitability is making the need for strategic change in a different way to past endeavours more crucial. Technology and data will provide a vital competitive advantage – the emphasis is on smart and wise spends that will transform, rather than incremental spend to ‘keep moving’. Managers taking the approach of automation to release savings and recycle to differentiate are setting out a longer-term strategy, which focuses on AUM growth and the survival of the fittest.

Overall, asset managers have been the slow movers in the financial services industry – where other sectors have seen more revolutionary changes. Banks have previously invested on digitisation and automation to create scale and efficiencies. They have rapidly redirected focus to new digital propositions and services, given new market entrants are posing a competitive threat. A similar trend has descended on wealth and asset management – where focus has historically been on the demands of the front office and winning investment strategies, an ‘outside in’ approach is inevitable to ensure relevance and responsiveness. This, in turn, requires strides to be made in creating scalable processes, removing legacy and investing in plug-and-play FinTechs, which offer rapid innovation opportunities.

Technology will continue to play a key role in automating certain functions to allow employees to devote more time to higher value activities and the analysis of the many new datasets now available to improve decision making. The objective is to make value-add the whole focus of the workforce to result in improved ROI, higher client satisfaction and ultimately higher profits. Organisations that make the best use of partnerships and outsourcing will give themselves the capacity needed to focus on this workforce transformation.

Alongside technology, data is the twin success factor to achieving scalable transformation. Investing in data foundations is critical to enable a well-oiled machine that is fuelled continually by forward-looking insights.

Making the best of data falls to the five Vs: volume, velocity, variety, veracity and value. As more data becomes widely available, the competitive advantage will come in the interpretation of data and decisions made off the back of these insights.

To be successful on this journey, the tone needs to be set from the top, with the ExCo fully understanding and embracing technology and data, and reinforcing these as critical to a new future way of working.

Reach out to Rob Carter to discuss how to fast-track your firm’s digital transformation.

Rob Carter
Technology Transformation Lead
Associate Partner, Wealth and Asset Management Consulting
rob.carter@kpmg.co.uk
KPMG in the UK
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