KPMG: Asset Management Industry is Not Sustainable

The number of asset managers will halve by 2030 due to demographic, behavioral, and technological changes, the consulting firm has said.

(June 17, 2014) — Today’s global asset management industry is not sustainable for its future client base, KPMG has said, as new technology, demographic and social habit changes will force managers to transform. 

Not all managers will be able to survive the inevitable evolution, the consulting firm said in a report this week, predicting half of today's firms will be gone by 2030. 

“Investment management will not escape this overhaul [of the corporate landscape],” the report said. “In fact, the impact could be profound. We feel that the industry will need to radically reshape to remain relevant.”

According to KPMG, by 2030, 13% of the global population will be older than 65 years, compared with 8% of the population in 2014. And 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,” the report said. 

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

“Demographics are changing,” said Tom Brown, global head of investment management at KPMG. “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.”

KPMG said these investors would seek a more holistic approach to their finances, saving, and investments, requiring personalized 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 asset management firms. 

The rapid growth in new technology is to be another driver in changes in investor behavior, the report said, as it is expected that 50% 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 said. “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 consulting firm also said Fortune’s powerhouse companies such as Apple, Google, and Amazon could be interested in entering the investment management business in the future, likely partnering with established providers.

The idea is not out of the question, KPMG argued, as they have already earned younger generations’ trusts, employ business models “designed to make clients’ lives easier,” and have capabilities to understand their clients using data to deliver personalized services.

Related Content: Which Active Managers Actually Outperform Benchmarks?

«