Nine key drivers of change
for the global wealth and
asset management industry
Tumultuous change may be in store for the global
wealth and asset management industry in the
year ahead. The US interest rate environment is
likely to shift direction before the end of the year,
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the Eurozone and an outright recession in many
emerging-market economies will also weigh
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opportunities, or threats, of technology are ever
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the horizon, offering services at rock-bottom
pricing, unparalleled levels of transparency and
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rise of the machines in the form of electronic
distribution platforms and robo-advisors may
reshape distribution, wealth management and
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the institutional and retail level.
2
| Nine key drivers of change for the global wealth and asset management industry
In order of impact, we anticipate the top nine drivers for change in
the global wealth and asset management industry will be:
1. The year of MiFID II — and transparency. As the signature
post-GFC regulatory legislation in the US, the Dodd-Frank Act
restructured the compliance environment for that nation’s
ÕfYf[aYdk]jna[]kaf\mkljq&KaeadYjdq$Ea>A<AAoadd`Yn]Y
widespread effect on the regulatory framework for the
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is the world’s second-largest market in terms of assets under
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particularly in how they distribute products, incentivize their
client-facing advisors, and communicate and interact with
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thoroughly reviewing and possibly rewriting their playbooks
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Department of Labor should shortly issue a decision on whether
client-facing advisors will be bound by a highly stringent
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ghhgk]\lgl`]hj]nagmkklYf\Yj\g^ÉkmalYZadalq&ÊL`]f]ojmd]k
and enhanced regulatory framework may very well restructure
how total fees are disclosed and how funds are distributed in the
]fgjegmkj]laj]e]fl%hdYffaf_khY[]&Afk`gjl$l`][gehd]pYf\
changing compliance environment will continue to drive change
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2. The drive to grow the top line will likely accelerate M&A
activity. Growth through traditional organic strategies — such
as increased spending on marketing, advertising, enhancing
the product suite and hiring strategically — is costly and can
lYc]lae]lg\]dan]jlYf_aZd]j]kmdlk&K`Yj]`gd\]jkg^hmZda[dq
3. The spending on private wealth management (PWM) growth
will cool — and refocus. Kaf[]l`]?>;$k]n]jYdÕjek`Yn]
Z]]fafYn]jalYZd]YjekjY[]g^kh]f\af_lg]phYf\l`]aj
private wealth management businesses in terms of increasing
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business model in wealth management offerings made it a
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*()-$l`]^j]frqlgZjaf_afegj]Yf\egj]k]Ykgf]\Y\nakgjk
and more proven books of business, and the heavy investment
in brand equity and marketing that came with the increased
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change direction and shift focus toward organic growth, as well
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]paklaf_j]kgmj[]kYf\oal`]paklaf_[da]flkZqj]kljm[lmjaf_
afl]jfYdhjg[]kk]kYf\]f`Yf[af_l`][da]fl]ph]ja]f[]&>mjl`]j$
a far more targeted and personalized approach to marketing
and client service will slowly be implemented, in which client^Y[af_HOEY\nakgjk[Yj]^mddq[mklgear]l`]aj[geemfa[Ylagf
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Nine key drivers of change for the global wealth and asset management industry |
3
4. The day of reckoning in pensions is near. L`]]flaj]_dgZYd
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been made, often in legally binding government-guaranteed
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few assets have been set aside to fund those future promises
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policymakers and stakeholders to address the growing and
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likely require more public sector debt to be issued to partially
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little actual capital has been set aside to safely meet growing
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All the 13 major pension markets (in the chart below) have experienced an increase
in their pension assets during the past 10 years. However, the general litmus test for
adequate funding is for assets to be at least 150% of GDP.
18.0%
16.0%
14.0%
12.0%
10-year CAGR
| Nine key drivers of change for the global wealth and asset management industry
180%
200%
But at the same time, liabilities are also rising. In the US, in particular, the funded
status (proportion of all future liabilities that can safely be met based upon current
assets and actuarial assumptions) is steadily declining.
Aggregate funded status of US DB public plans^^
5. The robo-advisor has arrived. A number of electronic
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few years — and still more will enter the market and see even
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by algorithms, these low-cost, automated advisory platforms,
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very effectively target the lower- to middle-income segments
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making service to lower- or middle-income investors, it is
still unclear whether rock-bottom pricing can eventually
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hjgÕlYZadalqYf\dgf_%l]jenaYZadalq&:q[gehYjakgf$f]oklYjl%mh
airlines are launched each year in the global aviation market
and grow rapidly due to rock-bottom pricing, and they are
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operations due to cut-rate pricing and negative operating
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Nine key drivers of change for the global wealth and asset management industry |
5
6. ETFs have become the giant gorilla in the room.F]lafÖgok
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into all alternative investment products within two or three
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including hedge funds as well as private equity, private debt,
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=L>k$l`]lghl`j]]hjg\m[lhjgna\]jk[gfljgdgn]j/(g^l`]
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Yj]$Yf\$egj]g^l]fl`Yffgl$`golg]nYdmYl]l`]e&>mjl`]j$
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registered or an alternative product, will be forced to compete
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| Nine key drivers of change for the global wealth and asset management industry
7. Fixed income is still alive — and very much kicking. Oa\]khj]Y\hjgfgmf[]e]flk
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afÖgokaflgÕp]\af[ge]af*(),o]j]kljgf_dqZmddak`&L`]r]jg%jYl]]fnajgfe]fl
oadddac]dqlYc]Ylmjfafl`]MKl`akq]Yj&>mjl`]j$\]eYf\^gj[YhalYdhj]k]jnYlagfYf\
af[ge]$]p`aZal]\egkl[d]YjdqZql`]_jgol`g^gml[ge]%gja]flYl]\kgdmlagfkkm[`Yk
target date funds, is stronger than ever, owing to the rapidly growing market segment
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Nine key drivers of change for the global wealth and asset management industry |
7
8. Emerging markets (EMs) will see limited growth. L`]j][]fl
ruble crisis, weakening global commodity prices and the bubble
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[geemfalqlgj]Ykk]kkl`]aj]klaeYl]kg^^mlmj]_jgol`&
O`ad]l`]j]oadd[]jlYafdqZ]hg[c]lkg^jYha\_jgol`af[]jlYaf
eYjc]lk$km[`YkAf\gf]kaYYf\Af\aY$egklg^l`]=Emfan]jk]
oadd^Y[]j]\m[]\afn]klgj\]eYf\&Fg\gmZlafn]klgjkaf
emerging and frontier markets are all too familiar with volatility
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will likely rationalize capacity in terms of spending, product
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a potentially vast market that it more than merits continued
investment and attention, albeit somewhat moderated from
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volatility, transparency and regulatory oversight, as well as a
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daeall`]Za\^gj]phgkmj]lg;`afY&Gf]\Yq$;`afYoaddZ][ge]
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af\mkljqÈZmlfglaf*()-&
After having experienced double-digit growth for years, China is now heading for more muted growth
14.2%
12.7%
11.3%
10.1%
9.6%
10.4%
9.3%
9.2%
7.7%
2004
2005
2006
2007
2008
2009
2010
2011
2012
7.7%
2013
China’s GDP growth rate
Note: 2013–18 are estimates
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8
| Nine key drivers of change for the global wealth and asset management industry
7.4%
2014
7.1%
6.8%
6.6%
6.4%
2015
2016
2017
2018
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will look to enhance their capital structure and return cash to
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9. Share buybacks will accelerate.L`]j]akem[`\]ZYl]afl`]
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Buyback in 3Q14 (US$m)**
AMG
BEN
FII^
IVZ
LM
NTRS
TROW
… and outstanding repurchase authorizations indicate share buyback activity is likely to continue
Outstanding stock repurchase authorization (US$m) as on September 2014**
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