30 September 2014

Asset managers to face growing competition from big tech and retail firms

18 June 2014  |  4796 views  |  0 happy Family

Technology change and shifts in demographics could pave the way for digital powerhouses like Google, Amazon and Apple to become the next big players in asset management, asserts KPMG.

The global asset management industry will radically transform over the next 15 years due to seismic shifts in client demographics, technology and changing social values and behaviours, says the accountancy and consulting firm.

The report, 'Investing in the Future', predicts that by 2030 the client base of a typical asset manager will be completely different to today's, as generation X approaches retirement, generation Y matures and middle classes in emerging countries grow. KPMG warns that current business models will not be fit for purpose.

Ian Smith, financial services strategy partner at KPMG, says the clients of the future will be fundamentally different in terms of their needs and expectations. "They will demand more personalised information, education and advice that will require asset managers to radically address their technology capabilities to really understand their clients and support this level of service."

Asset managers still have a long way to go to recognise and exploit big data and data analytics, he says. A growing compliance burden aligned with a patchwork of legacy systems are distracting firms from building the new platforms required to serve the next generation of customers.

"New entrants, who aren't plagued by legacy issues and outdated clunky systems, will thrive as they can move quickly to implement more relevant digital and data strategies," says Smith. "Trusted brands that resonate and appeal to a more diverse client base, as well as the younger generation, may be able to build scale quickly. We could see the Apples, Googles or large retailers of the world becoming the next big powerhouses in investment management."

As such, KPMG expects to see mass consolidation in the industry and predicts that within 15 years there will be half the number of players currently in the market.

The report also predicts that most people will buy investment products on-line rather than through a face-to-face adviser. Customers will also buy based on their own research supported by crowd-sourced opinions on 'TripAdvisor type' websites.

Smith concludes: "The growing relevance of online communities and social networks is changing attitudes and behaviours. Consumers are increasingly looking to 'people like me' rather than professionals for advice, guidance and direction."

Similar sentiments are being expressed higher up the value chain in the latest edition of the World Wealth report from Capgemini and RBC Wealth Management. The report's Global HNW Insights Survey found that nearly two-thirds of the world's High Net Worth Individuals (ie those with $1 million in liquid assets) expect to manage most or all of their wealth relationship digitally in five years and would consider leaving their current firm if an integrated channel experience is not provided.

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