Asset managers need technology to reshape product offerings and operational models, says report
As the passive shift and “race to the bottom” on fees that defined the recent half-decade seem poised to fade into the background, asset managers are under pressure to revisit their business and operating models with technology focused on capabilities and value addition.
In a new report, Accenture said that from 2019 to 2020, AUM growth among asset managers reached 4.4%. However, that was offset by a 2.6% decline in revenue and a 0.4% increase in costs.
Asset managers today, the report said, are increasingly squeezed by demands for ESG investment. Aside from demands to expand their ESG offerings, they are also “expected to yield their passive fund holdings to drive meaningful change at companies they invest in.”
Product and fee pressure are also rising. The race to zero for ETFs is coming to a head, prompting firms to reflect on the viability of amassing market share as a business strategy. Justifying active funds’ fees continues to be challenging given their broad underperformance, while the demand for personalization has intensified.
To come out as winners in their industry in five years, the report said asset managers must reshape their operating playbooks to leverage AI, data, and analytics.
A broad investor shift away from purely seeking alpha toward purpose-driven investing, it said, should invest in AI technologies that enable “fast, data-driven decision making around returns, product suitability and new offerings.” Related to that is the need to adopt AI and analytics solutions around data mining, signal generation, optimization, and prediction to generate sustained and measurable results.
While cost-cutting is likely to remain high on the industry priority list, Accenture said a new path to profitability is needed. That entails creating a seamless, end-to-end digital model that simultaneously delivers a simplified, cost-effective core operating model and a greater client experience.
Beyond that, it said asset managers should start looking at data as a strategic asset that can play a crucial role in delivering client value and driving profitability.
