Asset Management Firms Need To Adapt Or They Will Die

As historically successful asset managers look at their world that is showing signs of cracking, they express concern that the traditional business model upon which they have relied is now threatened. In a survey of the top asset managers in the world, Boston Consulting Group (BCG) provides a glimpse into the shifting sands that will likely result in “tomorrow’s industry leaders (appearing) quite different from today’s.” Traditional Asset Management Firms that rely on a static business model that has worked in the past are not guaranteed to be around in the future, as a new categorization for the asset management industry might best drive business planning.

A new world for Asset Management Firms likely to leave those that don’t adapt in the dust

Asset Management Firms could be at the dawn of an “industrial revolution” that is likely to turn the industry on its head in unexpected ways. But success for those who understand the roadmap and recognize how the industry is being transformed can position their firms to reap the future benefits.

In part, the new thinking can be best illustrated by considering what has been considered a solid correlation pattern that is suddenly broken. In today’s fund management world, asset growth is not leading to higher profit margins.

This correlation decoupling is yet another sign of disruption amid a generally “tepid” year for US fund managers, the Boston Consulting 2017 asset management report titled “The Innovator’s Advantage” noted.

In 2016, global asset management industry assets climbed to $69.1 trillion, up 7% on the calendar year. That headline might appear positive except that 2016 was a year in which the S&P 500 Total Return Index was up 12.25%. Asset growth failed to keep pace with a common stock benchmark that has likewise bedeviled many active fund managers.

Not only did the industry fail to match the S&P 500 yet again, but the 7% growth was not driven by new inflows, a…

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