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Although the calendar may have changed, the same trends that shaped the asset management industry in 2019 will continue to drive long-overdue change in 2020. The economic pressures that have weighed down asset managers over the last couple of years will continue to mount, especially as the tide of market-fueled asset growth subsides.The unalterable industry trends, including rising passive inflows, fee compression, increasing regulation, and platform rationalization – continue to threaten the profit margins and, ultimately, the survival of small and emerging firms. As these trends come more sharply into focus, 2020 will be a pivotal year in which firms either get ahead of them or continue their slide into oblivion.
Clients Leading the Change
At the core of the challenges facing many firms are the shifting needs, preferences, and priorities of investors and the fund platforms and intermediaries who cater to them. Even as AUM continues to climb, thanks in large part to asset-price inflation, revenue and margins are shrinking as pressures mount from shareholders, clients, and regulators for funds to deliver more value at lower costs.As a result, asset managers are rushing to streamline their operations while rethinking their product offerings and distribution models. However, with 85% of AUM concentrated among the top 50 funds, the biggest challenge for boutique firms is being able to achieve significant differentiation and the means to get their story out to the right subsegment of investment consultants and financial advisors. Good performance can no longer be the complete story. With thousands of available options, firms must be able to demonstrate their value in ways that make them appear compelling and unique to their target audience.
Traditional Sales and Marketing Methods No Longer Works
Asset managers are beginning to realize that the traditional approach of relying on patchwork intelligence, street smarts, and haphazard communication campaigns to connect with clients and prospects no longer cuts it. Nor does the product-centric approach of equipping their sales teams with fact sheets and generic pitchbooks. Firms holding on to these outmoded methods risk alienating themselves from a large segment of their market.
More Firms Catching Up to Technological Advancements
After several years of tip-toeing around the issue, 2020 will be the year that asset managers finally turn their focus to technology and data analytics. Coming this late to the game, it won’t necessarily provide firms with any real edge, but it will at least level the playing field with those firms that have been using it successfully for years.In 2020, more firms will benefit from technological advancements in data collection and analysis to completely revitalize their ability to grow assets.
- Due to the increasing demand for tailored solutions, more firms will use data mined from their CRM, websites, and social media to identify client needs and preferences to create more targeted products and reach more clients.
- Using a digital intelligence infrastructure built on a marketing automation platform integrated with their CRM, firms can create a more interactive engagement with targeted prospects. Sales process flows can be created, monitored, and measured, driving more qualified leads deeper into the distribution funnel.
- The same technology can be used to optimize their distribution networks, enabling them to more quickly and efficiently connect with the most receptive subsegment of advisors based on their interests, level of engagement, and their communication preferences.
- Firms with data analytics capabilities will better understand their customers so they can better align products, pricing, and financial data to facilitate the smooth flow of information to their product development and sales functions. The sales and marketing functions can act more collaboratively to create the support that drives sales.
- The same capabilities enable asset managers to provide more value with each interaction, whether it’s providing a unique perspective on market or industry trends, or personalized solutions to help advisors grow their practice. The more personalized the engagement with advisors, the more value they receive.
- With the proliferation of outsourced technology solutions, boutique firms can control their technology costs while accessing the scale that can produce significant ROI. Technology will become a necessary cost for asset managers, but it reduces overall costs by streamlining processes and creating operational efficiencies.
- The inescapable trends transforming the industry over the last several years have forced many asset managers to question their business models as they struggle to maintain their relevance. The key to this disruption has been the technological advances, such as data analytics, machine learning, and artificial intelligence, which have thus far eluded many firms. The increasing acceptance of technology will upend the traditional distribution strategies enabling more asset managers to survive and even thrive in the coming years.