How asset management firms are navigating uncertainty and becoming more resilient in the face of disruption
Asset management firms are recognizing how much talent and technology go hand in hand. By making smart choices when it comes to technology integration, firms hope to empower employees to do their best work – while elevating their overall service offering. Technology and talent can also help firms navigate uncertainty and become more resilient in the face of disruption.
Wipfli LLP’s ‘State Of The Asset Management Industry - 2023 Research Report’ shows “common themes uniting wealth management and asset management firms’ priorities,” says Anna Kooi, financial services and institutions practice leader at Wipfli. "Employee retention and recruitment, client engagement, and technology integration are all crucial for future success, and firms have to balance budget allocations and investments in each area appropriately.”
These firms face ongoing rate hikes, uncertain market performance, geopolitical tensions, and increased competition as they position themselves for long-term market stability.
Rebound to normalized patterns
Firms are showing tempered optimism after several year of market instability marked by workforce shortages, pandemic-fueled irregularities, and rising inflation. In fact, “more than three-quarters (78%) of asset management firms we surveyed believe the market will rebound to normalized patterns in the year ahead. But at the same time, roughly 72% of firms anticipate extreme market impacts from geopolitical events and, in the US, the majority of firms believe a recession (72%) or a global recession (66%) is likely in 2023. Therefore, when it comes to revenue growth, nearly two-thirds of firms (65%) anticipate conservative growth of 5% to 8% in the coming year while less than a third (28%) expect more standard growth of between 8% to 10%.”
Rate hikes, volatile markets, geopolitical tensions, and increased competition also contribute to cautious economic optimism.
Both wealth management and asset management firms anticipate shifting economic times ahead, with 62% of wealth management firms and 72% of asset management firms expecting a recession in the US in the next 12 months. Accordingly, the majority of survey participants for each industry estimate conservative market growth of 5% to 8% over the next 12 months (55% wealth, 65% asset). Less than a third for both industries anticipate standard growth of eight to 10%.
Recruiting top talent and implementing technology are key concerns for both industries. About two-thirds of both industries (66% wealth, 69% asset) list employee recruitment as one of their top concerns, and asset management firms note that talent management is their most important strategic focus. Also, asset management firms are ahead of the curve in recognizing how technology can assist and automate tasks for employees, while wealth management firms are also focused on new client acquisition and cultivation.
“Both wealth and asset management firms need to think about their client acquisition strategies if they want to reach new demographics,” says Kooi.
On the precipice of a new era
Asset management firms are experiencing a massive shift in how technology is applied in their day-to-day operations. Three-quarters of these firms name "managing and implementing change" as the top factor driving their goal achievement. With the onset of industry-changing technologies like artificial intelligence enhancing their work, asset management firms know they are on the precipice of a new era.
The report says asset management firms recognize the important role technology will need to play due to the ever-increasing complexity of investment opportunities and client demands. People of all generations are increasingly comfortable with technology and expect firms to provide a level of reporting on metrics well beyond that of monthly returns. Investors are turning to technologies like AI for insights into their portfolios' risks and exposure to ESG initiatives. Firms who begin offering this type of reporting now can establish an edge in client acquisition over less progressive competitors.
Technological integration is transforming how asset management firms do business. Some firms are already using technology to support more efficient client onboarding and account management processes, as well as using data analytics to inform business decisions. Eighty-three percent of asset management firms are using business analytics to support data-driven decisions, and 58% of wealth management firms have increased their use of analytics in key business strategies.
Investing internally for long-term success
To navigate continued uncertainty, the report recommends asset management firms focus on priorities likely to yield positive, long-term results. It says too much or too little cultivation of either talent or tech can send firms spiraling. Instead, a balanced approach to both is needed.
Additionally, firms can give themselves an edge to find top talent by offering innovative perks and building an in-office culture that is welcoming and inclusive of diverse views. Tech integration should be embraced, but only after careful – and measured – experimentation so that ROIs are maximized. Firms can look to technology solutions to assist in structuring portfolios to generate alpha and to help address workflow challenges and increased client demands.
By effectively building synergies between talent and technology, firms can amplify their capacity to serve clients and reach new tiers of business success.
