Asset management’s future will be either entirely virtual or hybrid, with a combination of online and in-person contact. Either way, the old ways of doing business seem to have ended.
InA December articleThe authors, Oliver Wyman partners Julia Hobart (author), Joshua Zwick (partner), and Kamil Kaczmarski (author) outlined ten trends that will affect the asset management industry in 2022. This includes the shift towards a virtual working model. According to the article, research that the firm conducted before the Covid-19 pandemic indicated that a completely virtual asset manager one that would eliminate in-office, in-person contact with clients could lower the managers cost base by about 40 percent.
Zwick, Zhang and Kaczmarski all concede that most managers will eventually switch to a hybrid business model, but they argue that some trailblazers may opt to go all-virtual to cut down on costs and provide better customer service. Zwick said that there is greater pressure within the industry to lower costs. Institutional Investor. The buoyant markets have been a boon. [float]All boats have a bottom. Managers are now focused on ways to make their business more efficient.
Zwick stated that many managers spend significant capital on client service expenses, including travel and entertainment. These expenses have declined over the past two decades, allowing managers the opportunity to pass savings directly to the bottom line of their companies. The question now is if those savings will stay in-house, or be passed on eventually to clients.
He stated that he believes the jury is still out. With the increasing pressure on asset managers to generate net of fee performance and the scrutiny on the amount being charged for fees, it would not surprise me that the power lies with the investors, rather than the managers. Then, eventually, clients would reap the benefits of a more remote, virtual operating model, rather than being captured by the managers. The markets are too competitive to suggest otherwise.
Although virtual models can help managers reduce costs, Yariv Ithah, a managing principle at Casey Quirk (part of Deloitte Consulting), said that cost is not the primary motivator in managers changing how they do business. Itah and his colleagues worked with executive teams since the pandemic. They have been more focused upon the sustainability of their business models. According to Itah, the consensus is that most firms consider a hybrid model the most viable way of maintaining the culture of the investment team. Itah stated that although the definition of hybrid models has changed over time, most managers still loosely define them as: We are not going back to how things were.[Asset managers]Itah stated that the hybrid approach is primarily about changing culture. II. They believe that most of the value comes primarily from two sources: [unstructured]Interaction among members of the investment team…and teaching the next generation.
The digital transformation of the asset management industry is well underway. KPMG released a September survey that showed that 75% of asset managers surveyed wanted to see digital transformation. Institutional InvestorAs previously reported. Accenture released a survey in October that included 100 executives in asset management and c-suite. It found that 68 per cent of respondents felt their firm was not ready to adopt new technologies.
Zwick agrees that asset mangers are concerned about culture, collaboration. He believes that they are most concerned about the possibility of a virtual model that will undermine the culture of teamwork and collaboration in firms. He stated that asset managers do not want the culture of disintegration.
He also stated that the ideas presented by him and his authors can serve as a healthy challenge and reminder to the status-quo that there is always a better way for managers to fulfill their mandates. [Managers]Zwick stated that you need to think outside the box and challenge your assumptions. Virtual collaboration is a better way to work together and can be used by a wider range of people.