Asset managers who want to remain successful are going to have to focus on more than just making money, according to a survey by PricewaterhouseCoopers (PwC).
“If we don’t step up, others are going to step in.”Three-quarters of CEOs from all sectors—including 66% of asset management CEOs—said they anticipate a time when performance will be determined by more than just profit.
For asset management CEOs, success in five years’ time will be defined by responsibility, with 68% anticipating that corporate responsibility will be core to everything they do. Even more (86%) said they will need to prioritize the long-term over short-term profitability.
“Early on, I thought it was all about the rate of return or maybe the rate of return relative to volatility,” said David Booth, chairman and co-CEO of Dimensional Fund Advisors. “That’s clearly still very important. But I think that success is also measured another way—did the clients have a good experience?”
This sentiment was echoed by the other CEOs surveyed, with 62% saying they would focus on creating more value for stakeholders in the future. Nearly a quarter said they had changed their organization’s purpose in the past three years to take account of the broader impact they have on society, while 33% claimed this had always been a part of their purpose.
“That’s what success is about,” Booth said. “Getting good returns and achieving them in a way that enables people to relax just a little bit more.”
While 90% of asset management CEOs were confident about revenue growth in 2016, respondents worried about market volatility, cyber security, the speed of technological change, and shifting consumer expectations.
“If we don’t get into the voids that are being created and the opportunities being created, there are many other new participants who will come in there,” said Nigel Wilson, CEO of Legal & General. “There are some really smart people in private equity that are entering our industry. There are lots of smart but currently very small ‘fintech’ companies… If we don’t step up, others are going to step in.”
According to the survey, 85% of asset managers are examining how they can use technology to improve the stakeholder experience. The same proportion said they were looking to respond to shifting stakeholder expectations by reviewing who they partner with and how they manage those partnerships, with 58% prioritizing strategic alliances and joint ventures.
“Asset management is going through a time of fundamental change,” said Barry Benjamin, global asset and wealth management leader at PwC. “Asset managers need to become more innovative, leverage technology, manage a wider range of risks, and use digital communication intelligently if they are to remain competitive.”
Related: A Five-Year Plan For Asset Managers