While people like to focus on the size of the pensions and other savings pools a long-time into the future, they don’t often think about the size and structure of the asset management sector which will support the growth. A report from KPMG says the asset management industry is unsustainable.
A combination of new technology, demographic shifts and changing social habits will force many fund managers from the industry. About half of today’s asset managers will be gone by 2030, the report published globally last week, says. The industry will need to “radically reshape itself” to remain relevant.
The report says, by 2030, 13 per cent of the global population will be older than 65 years, compared with 8 per cent in 2014. As today’s employees age, they will better understand the need to take greater responsibility for their retirement planning, given the decline of state provision in many counties and continued pressure on the traditional annuity models.
According to Tom Brown, global head of investment management at KPMG: “Demographics are changing, younger generations will likely save more as they see their parents run out of money in retirement. The successful asset managers of tomorrow must focus on building cradle-to-grave relationships with a dramatically different and more diverse client base from today, which includes much younger investors.”
The report says these investors will seek a more holistic approach to their finances, saving, and investments, requiring personalised solutions across various stages in life from their managers. Institutional investors are also expected to continue calling for better information, more flexible solutions, and tailored and multi-faceted delivery and reporting from fund managers.
The rapid growth in new technology is to be another driver in changes in investor behavior, the report says, as it is expected that 50 per cent of the world’s population will have access to the internet by 2030.
“Today’s proposition is unlikely to be suitable for the broader client base of the future,” the report says. “It will require a very different business model – one which requires providers to be much more engaging and relevant to a broader range of customers. This will mean understanding clients far better than today and creating a new value proposition based around education, outcomes (not just returns), flexibility, and personalized solutions.”
The report also raised the possibility, as has been suggested often enough before, that new types of fund managers may emerge, such as new divisions of Apple, Google or Amazon. Others have pointed out that in Australia, big brands such as Coles and Woolworths are already selling services other than groceries.