Introduction
In asset and wealth management (AWM), investors are now thinking in new ways about how their capital is handled. They’re embracing digital technology, changing the way they interact with AWM firms. They’re more and more interested in social responsibility and other non-financial aspects of investing. They recognize the higher level of competitiveness in the AWM industry, and are paying attention to cost and efficiency, even scrutinising firms’ operations. And social media has given them a platform from which to broadcast their opinions, including dissatisfaction about firms that fail to meet expectations. Things are changing from asset managers’ perspective, too, especially as tension increases between appropriately exercising fiduciary duty on the one hand and providing consistent, excellent investment returns on the other while also balancing issues of social responsibility, risk management, uncoordinated global regulation and underfunded retirement.
To determine what investors care most about and how satisfied they are with asset managers’ performance in these areas, we conducted a survey of 750 institutional investors and 10,000 retail investors around the world. Then, we created an Investor Alignment Index that measures the gap between how much investors value certain factors and how satisfied they are with asset managers’ performance in those areas. In this report, we’ll explain our findings and offer advice on what AWM firms can do to begin their transformation.
What really matters to investors?
In earlier papers in our Asset and Wealth Management Revolution series, we explored both the unparalleled opportunities for growth we were seeing in the market and the challenges that the intensifying squeeze on operating costs, fees and value for money were presenting.
Our new research underlines the extent to which performance is no longer just about short-term financial returns in isolation from other factors. The investors we surveyed are, as a general group, most focused on the macroeconomic and political environment, ahead of risk-return. This would suggest that investors see managing the impact of the former to be absolutely critical in optimising the latter. Our survey shows that the macroeconomic and political environment is especially important for retail investors, who are generally the most vulnerable to a downturn.
Six areas of opportunity for Asset & Wealth Managers to differentiate:
1. Risk-return
2. Fees
3. ESG
4. Relationships
5. Operational strength
6. Macroeconomic and political environment
Business not as usual
The overriding message from our research and analysis is that investors expect more than most AWM businesses are currently able to offer. And without urgent attention, the gap between expectations and satisfaction will get wider and wider. The bull market of recent years has made it hard to differentiate performance, with firms racing to the bottom on cost and fees. But AWM firms will have an opportunity to distinguish themselves in the difficult environment ahead if they embrace a transformation that’s about redefining their purpose and strengthening their capabilities to better align with investors’ priorities.
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