Jean-François de Clermont-Tonnerre from AUM Asset Management on what’s in store for asset management in 2021.
As we finally leave behind one of the most challenging years in recent memory, it’s time to look ahead to 2021. We are now in the phase of the pandemic where vaccinations are on the way, but the world is still grappling with its ‘new normal’.
The news of a number of vaccinations beginning to be rolled out around the world is certainly offering some hope to organisations and investors alike. However, there is no doubt that 2021 will present its own challenges and rough patches, and for asset management this means strategic change.
What is the outlook for asset managers in 2021?
This climate of ongoing uncertainty means asset managers must ensure they are competitively agile. It’s vital for asset management firms to be able to pivot as fast as possible to fast changing events. In order to do so, it’s important to use sophisticated and cutting-edge analytical technology to appropriate anticipate the level of impact of the challenges on business development.
Managing risk has always been part of asset management, of course. But the sector is facing a riskier marketplace than ever before. Although the pandemic was the most obvious challenge of last year, there are other factors combining to form a perfect storm of generation defining challenges. These include a slowing global economy, many severe natural disasters, social-political fallout from Brexit and the US election and unprecedented levels of upheaval across the board.
Within the asset management industry itself, there has been higher levels of aggressive competition. Regulations are ever more complex and the rapidly changing technological landscape is also altering the very nature of the sector. But there are opportunities to grasp in 2021 for asset management firms.
5 asset management strategies for 2021
Create a programme of sustainable cost reductions
Often asset management firms take a short-term approach to cost reduction. While finding a certain percentage of cost savings as and when needed has been a traditional way to work, the 2021 landscape is more complex.
Costs are continuing to outweigh revenue growth, according to Accenture Research. There is no option for asset managers other than to take steps to establish a workable framework that constantly analyses processes and technology to continuously improve cost savings.
To do so, asset management firms can utilise various different tools including shared services. This goes beyond standardisation and centralisation and moves into globalisation. Asset management firms need to ensure that they can support business across different countries, sectors, and products.
Be innovative and open to new products
Product development within asset management will increasingly rely on the asset management firm having the ability to anticipate the needs of clients. The idea is to create bespoke personalised product sets according to their needs in this ever-changing environment.
Technology allows more companies than ever to do this, as they’re no longer held back by the high cost of creating personalised product sets. Personalisation in a properly scaled way will stand asset management firms in better stead for the future. Now is the time to begin to lay the foundations for working in this way.
Start by looking at your current portfolio and work out which are truly profitable. This data should then be used to decide how to adapt products for the future. At this point, asset management firms should also look at their portfolios against their social responsibility and sustainability. Remember that investors from the Millennial and Generation Z demographics are always searching for products that perform and are responsible investment options.
Put plans in place to be more agile
Transforming the operational model is now more important than ever for asset management firms. This is no longer optional, but essential. And after the events of 2020, it’s clear that the transformation should revolve around the agility of the infrastructure.
Find ways to ensure products get to market faster, are more flexible and fluid and slash the research and development time without compromising quality. Value has to be delivered much faster than the usual period of two to three years. This is the case whether it’s a product launch, acquisition, or massive initiative. Only work with partners, whether tech or asset management, that already have the infrastructure in place to pivot quickly and absorb changes immediately.
Improve data management architecture
Before getting involved with the newest tech, ensure that the overall data management platform is working as well as it can. The data foundation of an asset management firm is vital to delivering true business value.
In order to drive innovation and growth, asset management firms must utilise advanced analytics using AI and machine learning. This is the fastest way to improve efficiency, accuracy and return on investment.
The first step is to make sure that all data is properly being used for analytics. There is huge potential in the 60-73% unused data (according to Forrester research) in a typical firm. The proper technology working at its full capability would allow asset managers to access previously unused data sets.
Machine learning helps to clean data by normalising it and helps asset managers to review the way they’re applying rules.
Implement a culture of transformation
Asset management (and every other business and financial services sector) is now operating in a time of continual flux. There is no ‘going back to normal’ on the horizon, and it’s now about who can adapt and innovate in 2021. This mindset should permeate everything throughout an asset management firm, from hiring, training, partners, vendors, and clients.
Firms should ensure that the workforce has a collaborative, flexible and open learning environment. It’s important to consider how to create a culture that fully embraces the inevitable changes the firm will face and encourages the workforce to reinvent themselves along the way.
The asset management firms that will lead the way in 2021 will be those that take the chance now to review, reinvent and develop.