Year-end is a time to reflect on accomplishments and failures. How well is your firm dealing with the industry challenges of more regulation, higher costs, lower rates and falling revenue and profit margins?
Whatever your assessment, commit to improvement in 2017. Here are five ways firms can adapt to change, as revealed in a Deloitte report:
- Optimize resource allocations. High-growth firms allocate about half their costs to growth initiatives instead of holding on to outmoded business lines — even if it means suffering a short-term revenue impact.
- Streamline operations. Firms that paper over sloppy processes or jury-rig technology can’t grow their way out of their deficiencies.
- Differentiate investment capabilities. A high proportion of net new flows during the next five years will focus on outcome-oriented portfolios. They’ll be multi-asset, multi-strategy and designed around cash flow objectives. Nearly US$1.5 trillion will flow into beta-oriented components, as investors reward more of their fee budget to active allocation and less to product fees. Traditional alpha-seeking portfolios will rotate from benchmark-oriented strategies into more active, less liquid, non-correlated offers.
- Digitize distribution to reduce costs and more directly engage clients. Fintech that focuses on user experience is key for client engagement. Asset managers who invest in fintech will control more of the value chain, improving client persistency and overall economics.
- Build a unique consumer-oriented brand. Investor satisfaction about outcome delivery will become as important as relative benchmark performance. Thus, the industry will take on more attributes of traditional consumer-driven industries where products are difficult to compare, making brand more important as a decision-driver for customers.
Read the full report here.
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