distribution and asset management leadership in 2020...
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www.caseyquirk.comConfidential and Proprietary. For internal client use only. © 2015 Casey, Quirk & Associates LLC
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Proprietary and Confidential – For Casey Quirk and Casey Quirk Client Use OnlyCONFIDENTIALITY NOTICE: This presentation and the information contained herein is intended for the
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Distribution and Asset Management Leadership in 2020: Success Factors
Ben Phillips, Partner
6 June 2016
www.caseyquirk.comConfidential and Proprietary. For internal client use only. © 2015 Casey, Quirk & Associates LLC
1
Today’s conversation
The New NormalRise of Advice Transforms
the IndustryLooking Ahead:
Winning Strategies
• 2015: slowing growth, margin compression
• The “winner take all” dynamic accelerated
– Fewer winning players
– Active components struggled
– Individuals took control
• Outcome and advice gain prominence over products
– Regulation changes advice delivery
– Gatekeepers are becoming more critical
– Technology creates effective, efficient delivery
• Industry value chain is compressing
• Distributors are gaining share of asset allocation
• Distributors will compete by strengthening allocation skills and using technology
• Winning asset managers will differentiate their value proposition to customers
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2
The New Normal
Global asset management is becoming fiercely competitive
Unlike in previous years, capital markets did not buoy asset growth
Global AUM Growth Capital Appreciation & Net Flows
2.3%
2.6%
1.3%
10.0%
7.9%
1.5%0%
2%
4%
6%
8%
10%
12%
14%
’13
12.3%
AU
M G
row
th (
%)
’14
10.5%
’15
2.8%
Net New Flow Capital Appreciation
An increasing share of managers are experiencing outflows
Global Retail and Institutional Flows2013-2015, Manager Flow Experience
(% of all Managers*)
37% 40% 44%
63% 60% 56%
2013
PositiveFlows
NegativeFlows
20152014
Sources: Simfund, eVestment, Casey Quirk analysis
*Only includes managers with at least $10bn of AUM
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The New Normal
Passive, allocation and alternative products account for most new growth
Advisors are allocating more funds to indexing…
Net New Flow Concentration2012-2015, Global Registered Funds ($bn)
Note: Excludes cash. Sources: Simfund, eVestment, Casey Quirk analysis
36%
4%
26%
$789
8%
72%
$989
Passive
2015
10%
24%
2014
-4%
11%
TraditionalActive
Alts
MACS 17%
$927$848
2013
10%
46%
36%
36%
18%
2012
49%
41%
46%
171% 21% 27%
18%16%
23%
-64%
$189
OtherEurope
$341
-3%
$259
-4%
USA
9%
Net New Flow ConcentrationBy Registered Fund Domicile*,
2015, $bn
… especially in America
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New Opportunities
Industry dynamics
The rising influence of individuals is changing how investors seek advice
Institutional investors Individual investors Industry impact
Able to build portfolios from existing strategies
Seeking advice customizedto individual needs
More Service-Focused
Accredited investors Consumer investors More Regulated
More concentrated, RFP-driven buyer landscape
Fragmented buyer landscape
More Inefficient
Seeking optimized performance to meet liabilities over long term
Seeking specific cash flows over both short and long term
More Outcome-Oriented
A Redistribution of Product Opportunity
A Challenge to Maintain Operating Leverage
A Shift from Products to Services
1
3
2
A Re-Arranged Value Chain
4
Secular industry transition
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5Source: Casey Quirk analysis
Global Financial Wealth Assets and Flows2012-2014
Industry dynamics
Other financial services firms are aggressively entering the advice business
Flow of New Wealth Unmanaged Flow of New HNWI Wealth
44% 43%
22% 23%
12% 13%
16% 15%
5% 4%
1% 2%
6%
39%
32%
25%
11%
-13%
Global Financial Wealth
Total (€T) €114T €143T €7.8T
2012 2014 2012-14
Pension Funds
Mass Affluent
Managed by AMs
Other
Insurance
HNWI
Managed by AMs
Internal or Unmanaged Assets 46%
40%
Wealth Management
15%
Direct Investment
Banks
€2.6T
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Offers financial planning and proprietary multi-manager funds
Offer full-service financial planning tools
Platforms
Offer financial planning & personalized service delivered by advisors
Add automated advisory
Offer asset allocation products
Investment
Managers
From product to advice
The rise of advice is leading to vertical integration across the value chain
Wealth Management Value Chain
Product AdviceAllocation
Role
…as platforms take on a greater role in allocation and product development
U.S. Retail Intermediary RevenueBy Provider, 2007 vs. 2014
33%36%
32% 28%
37%35%
Product Revenue-Asset Managers
Advice Revenue-Financial Advisors
2007 2014
Intermediary Revenue-B/Ds and Platforms
Asset managers are losing share…
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7
Europe
Gatekeepers are playing a more active role in developing and delivering advice
Asset Managers’ Technology Spend2009 – 2014, % of Total Functional Costs*
Centralized models will gain prominence…
Gatekeeper Centralized Delivery ModelsIndustry Size, US+Europe, AUM $bn, 2015-2020
Asset Managers’ Technology Spend2009 – 2014, % of Total Functional Costs*
…and delivery will take different forms
$3,134
$881
2015
+29%
2020
Open Architecture
Closed Architecture
Execution only sale of proprietary product
without advice
Manager selection and asset allocation of third-
party products
Centralized Advice Models
Description Growth Prospects
Automated
Delivery of product/advice through
technology platforms
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8
Europe
The impact of advice model change will vary by country and channel
Source: Casey Quirk Global Demand Model
Net Flow by Model by Country2015-2020, €b
Private Banks
Retail Banks
Independents
Other Retail
Market scale and added regulation at the country level increases impact
Private banks will face fewer impediments than down-market competitors
€303 €291 €294
€172 €153€117 €110
€333
€201€158
€165
€58€48 €56
€34€6
Netherlands
€40
€636
€211
NordicsItaly
€491
Switzerland
€166
UK
€452
Germany
€166
France Spain
€337
Advisor Discretionary
Centralized Models
Scale of ImpactHigh Low
NNF Rate’15-20 Impact
• Reduce clients served• Press towards more
discretionary relationships
• Opt for execution only in MiFID markets
• Offer robo advisor or multi-asset product
• Tale of two markets – UK and continent
• Greater centralization
• Insurance firms shift focus toward guaranteed products
• D2C emerges as robo-offerings proliferate
3.7%
1.5%
2.9%
2.8%
Channel
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New competition in distribution
Technology will become a key driver of advice delivery in the future
Past Current Future
• Outcomes-based planning, benchmark-driven assessment
• Focus on HNW/wealthy, succession recognized
• Small practices with financial planners become mainstream
• Siloed investment advice and product access
• Outcomes-based planning and assessment
• Multigenerational focus
• Full-service firms with specialized skills
• Disintermediation accelerates with increased hybrid technology/advisor models
• Returns-based advice
• Focused on HNW/wealthy
• Manual, people driven approach
Advice Delivery Timeline
Use
of
Tech
no
log
y
Asset Managers
Insurance
Financial Advisors
Fintech
Investment Counselor Model
Technology-Enabled, Holistic ProvidersA
dvi
ce
Pro
vid
ers
Limited Business Infrastructure Complements FA advice
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10
Investment Performance
Price
Revenue-Sharing
Product Differentiation
BrandSpecialized
EngagementRisk
Management
Less Effective: “Compete Better”Relative outperformance
against large number of similar peers
1 2 3 4
New competition in asset management
For asset managers, success depends on differentiation, not relative performance
More Effective: “Compete Differently”Differentiate value proposition to reduce number of potential rivals
Competitive Responses in Asset Management
Talent Management
Higher-Tech Data Architecture
Corporate Development
A
B
C
Key Future Differentiators
Critical Success Requirements
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