For years, the asset management sector has been under growing pressure to transform. There’s been pressure on fees and – as a result – efficiency. There’s been pressure from customers – and therefore regulators – for value for money. There’s been pressure from new competitors – particularly FinTechs – to change the business model. And there’s been pressure from stakeholders to find new sources of growth.
Finally, all of these pressures seem to have come to a head. My experience working with leading asset management firms around the world suggests that most are now well and truly on the road to transformation. Indeed, in our recent global survey of asset management CEOs, almost half of all respondents said they believe their organization to be a disruptor in the market.
To be sure, we are seeing significant efforts to transform within many organizations. There is lots of investment going into updating and digitizing the back and middle office. There is great progress being made in the digital front office. And there are lots of strong efforts underway to automate the core portfolio management activities using intelligent automation and artificial intelligence.
Yet a significant majority of the CEOs in our survey seemed to suggest they may be struggling to achieve the outcomes they expected from their digital transformations. Most say they feel overwhelmed by the lead times required to achieve significant progress in transformation. Many admit they are struggling to keep up with the pace of technological change sweeping the sector. A growing number now acknowledge they are performing below their customers’ expectations.
I believe this is a pivotal time for asset management organizations. Many will continue to struggle to execute their transformation agenda and, as a result, may put their futures at risk. But some will take this opportunity to redouble their efforts and, in doing so, will rapidly emerge as new market leaders. Asset management CEOs will need to decide which camp they want to belong to.
For those deciding to recommit to their transformation agendas, here are five fairly simple tips – based on my experience – to help catalyze your thinking around transformation.
Partner with tech firms. Most industry players have been far too cautious in their approach to engaging with technology firms – particularly around new innovations and new model development. Asset management CEOs will need to be bolder if they hope to keep up with customer and stakeholder expectations.
Think enterprise-wide. While many organizations are making significant progress digitizing and transforming their back, middle and front offices, there has been too little effort put into understanding how these processes connect and interact across the enterprise. You can find out more about what it takes to become a connected enterprise in this recent report by my colleagues at KPMG’s Customer Advisory team.
Focus on the value within the strategy. Rather than attempting wholesale enterprise transformation in a single stroke, most would be better served (at this time) by focusing on those projects and initiatives that are well-defined, connected across the enterprise and focused on driving real and sustainable improvement within key pockets of the business.
Look for the signals of change. Part of the challenge facing incumbents is that the industry is ripe for change. They current way we buy and sell funds, for example, is archaic and is just waiting for a new technology (blockchain, perhaps) to utterly disrupt the status quo. Watching for these signals of change and responding quickly will be key.
Prioritize execution. Coming up with the transformation vision and roadmap is the (comparatively) easy part; where most asset managers are struggling is with the execution. The reality is that it’s not easy to transform while operations are in full swing. Thinking carefully about how the strategy will impact the business today, and in the future, will be key.
The good news is that asset managers seem confident they can make the transformation work. In fact, the majority of respondents to our survey proudly claimed that they were personally prepared to lead their organization through a radical transformation of its operation model to maintain competitiveness. Only time will tell how many of them were correct.