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EY research shows six key areas that are consistently important for asset managers seeking to enhance their current performance and differentiate themselves in an uncertain future. For each of these areas, we’ve highlighted specific actions that could be particularly helpful in the exceptional circumstances that firms currently face.
1. Reorientate around clients
Asset managers are finding new ways to deliver client-centric experiences to all their investors. Counterintuitively, removing internal silos and simplifying systems is often key to providing more specialized offerings. Possible areas of focus include:
- Democratizing retail investment: Making a wider range of alternative investments available to semi-professional and approved retail investors is a growing priority. Regulators are taking more flexible approaches to suitability, too. Private market platforms providing secondary liquidity and trading windows within longer investment periods will continue to see strong growth. Direct indexing has the potential to give more retail investors the kind of portfolio tailoring previously available only to institutions or the very wealthy. Collaborating with others in the investment ecosystem will be key to accelerating the delivery of democratization at scale.
- “Consumerizing” institutional investing: Large asset owners increasingly expect the sort of flexibility, convenience and digital interactions typically offered to retail clients. The use of retail techniques, such as constructing client personas for pension trustees or investment consultants, will accelerate. Some asset managers are creating new client experience roles focused on institutional investors for the first time.
- Improving generational focus: Aging populations and growing life expectancy are increasing the need for healthcare and retirement funding. Older generations not only need to accumulate more long-term savings, but to drawdown those savings over longer periods. The need for effective intergenerational transfer to Generations X and Y is growing, too. Those cohorts are highly aware of the links between financial, physical and mental health. Asset managers could play a key role in boosting wellness by helping them to save for retirement — while also finding new ways to elevate investment education and financial inclusion.
2. Digitize distribution
With digitization playing an increasingly dominant role in distribution, technology will not merely enable investor interactions. It will become central to delivering tailored, value-added experiences including education and support. Emerging themes include:
- Accelerating investor education: Finding new ways to digitally educate end investors and financial advisors will be key to delivering best in class experiences and outcomes. This could include the use of gaming to improve investor understanding and financial literacy. Education is closely linked to enhanced tailoring, especially as more investment strategies become available and as firms reach more first-time investors.
- Aligning investments with purpose: A deeper understanding of investors’ views and preferences, together with investor education about the full implications of investment decisions, will help firms to integrate ESG into their operations and ensure that investors can express their views through their financial choices.
- Improving hybrid models: Metaverse-based applications could allow firms to replace physical distribution hubs with virtual centers for financial advice. Virtual portals could be used to create new hybrid distribution models for retail and institutional clients that not only blend digital and human interactions, but which also harness new, virtual ways to engage with individual advisors.
- Preparing for tech-enabled ecosystems: The coming years will see the growth of complex investment ecosystems, with connected webs of asset managers, banks and technology firms collaborating in real time to deliver seamless experiences to clients. Asset managers need to ensure they have the digital distribution capabilities to play a range of active roles in multiple scenarios. At different times, this might include acting as an ecosystem orchestrator, or providing specialized offerings via an ecosystem. The importance of flexibility means that the ability to take a modular approach to partnering will be vital.