Firms should build a more proactive risk management function, diligently scanning the horizon for the next threats as risks evolve and manifest themselves in new, unfamiliar forms. Approximately three-quarters of businesses report that the disruptive impact of constantly shifting customer demands and new market entrants has increased over the past three years. A one-size-fits-all approach that attempts to protect all data and assets in the same way is most likely not appropriate for today’s risk environment. While there are some prominent examples of firms having pursued this strategy for years, those willing to redefine what truly are their proprietary “crown jewels” will pursue this path as a lower- cost and potentially faster way to drive growth. Trends in insurance asset management. -Economic, regulatory and legislative challenges impacting insurance provision-Investment strategies and asset allocation trends in play across leading insurance companies-Risk management-The increasing role that ESG and sustainability is playing in the insurance … Firms need to take a panoramic approach to stakeholders to progress gender balance in the workforce, with a $700 billion revenue opportunity for those that can serve women as customers better. Key issues to watch. People are the key to success and the catalyst to gaining acceptance for monumental change within the organization. For example, depending on their strategy, some firms might decide to explore outsourcing a function that was historically considered a profit center (e.g., trading). The operating environment is such that each cost has to provide clear and substantiated benefits that impact the overall investment lifecycle or customer experience—driving a call to action. From "open banking" to "open AM" through API. This trend will gain steam thanks to (a) improved liquidity with broadening of secondary markets, (b) vehicle innovation, (c) the challenge of a “lower for longer” investment environment, and (d) better handling of liquidity restrictions. Understand the true value of clearly defining an enterprise data strategy—how it could support innovation, and what capabilities are required to realize its full potential. Clients have more choices at their fingertips than ever before, so firms that win will likely be those who constantly challenge things like their product mix and distribution strategy. However many providers still operate in sub-scale territory and will struggle increasingly to justify their fees. 4 Asset & Wealth Management 2025 | The Asian Awakening Executive summary The APAC asset and wealth management (AWM) industry is expected to be the centre for global AuM growth in the coming years. Asset managers will start to build climate science expertise and integrate it into their investment process. We’ve seen that insurers with in-house asset management units tend to be more likely to be taking proactive steps given their responsibility for transitioning out of LIBOR-based instruments. custodians, depositaries, administrators and ManCo providers). Required fields are marked *, Next Post - What Lies Ahead: The Top Trends That Will Reshape Wealth Management in 2020, Suggested Post - What Lies Ahead: The Top Trends That Will Reshape Wealth Management in 2020, Create business agility by making the operating model more adaptable, Tap into the value of new technologies sensibly, Evolve your business model to focus on the customer, Identify, onboard and develop the right talent for today and tomorrow, Focus on long-term viability, not just short-term gains. Experimentation and proofs of concept in areas such as blockchain and quantum computing are expected to also eventually separate leaders from laggards. The latest survey by Insurance Asset Manager indicates that insurance companies have outsourced the management … Without an effective data strategy and data foundation in place, innovation may be constrained, and automation initiatives may run into head winds. With the recent significant drop in market capitalization for stand-alone … Delivering incremental value needs to be the focus. Yet operating models aren’t changing at pace.[1]. With the opening up of economies in the region, we expect to see more international asset … A true, front-to-back view of data is critical. A strong data foundation drives the effectiveness of emerging technologies and is a critical factor in unlocking scalability. For example, by licensing their proprietary software capabilities such as the white labeling of client platforms, or even their “product-in-a-box” offering, firms could realize more significant topline growth. While asset managers are unlikely to go on a bank-like capital raising crusade, they will become more purposeful in how they grow and manage their balance sheets. Client preferences and expectations have changed. How Private Banks Could Better Engage with Gen Z, Holistic wealth advice: Advisors need flexibility, Ten Trends Shaping the Future of Asset Management in 2020, Three trends in investment operations for the new digital era, To Self-Clear or Outsource: 5 Factors to Consider, Reinventing Operations in Asset Management, Accenture 2019 Capital Markets Global Risk Management Study, https://www.accenture.com/us-en/insights/strategy/whole-brain-leadership-for-c-suites, https://www.accenture.com/us-en/insights/capital-markets/asset-management-reinventing-operations, Responding to megatrends for future success, Capital market firms can do well while doing good post COVID-19, A $78 trillion growth opportunity for wealth managers, Bring on the new year: Five things asset managers need to succeed, Why the new playbook in asset management is digital – everywhere, Pandemic and Recovery Bring Collateral Management to the Fore, 5 Proven Benefits of Data Governance for Asset Managers, M&A Operations Success for Asset Managers, What Lies Ahead: The Top Trends That Will Reshape Wealth Management in 2020. The other trend to highlight is that this evolution is not just demand driven, as we have seen the asset management industry invest quite a lot in building out its insurance focused teams and strategies that … As part of the Accenture 2019 Capital Markets Global Risk Management Study, we asked 201 risk managers at capital markets businesses what is currently causing them the most worry. The new model should also address every core capability across the enterprise—front, middle and back office and infrastructure. Asset managers should be closely monitoring the maturity curve and roadmap of innovative technologies and understand their applicability to specific areas across the investment lifecycle. Paradoxically, while insurers should focus more on risky assets to … The insurance industry has endemic problems, such as inefficiency (policies are … In twenty? Full organizational acceptance of change starts with leadership vision and direction. Ten years ago the industry still used fax machines; today asset managers are developing APIs to allow them to connect to a broad ecosystem of service providers, and exchange data and information seamlessly. 9. Leading asset managers will take advantage of these advances by working with digital innovators (e.g. Marco Bravo, CFA. The accelerating trends in applied intelligence, automation and outsourcing are expected to cause players to have to defend all their cost center strategies. Asset managers should develop deeper, more meaningful customer relationships to deliver the right offering to the right client at the right time. Modernize the existing data supply chain—data architecture, governance, platforms and operations—if needed, so it is better positioned to manage data, especially at the pace required to generate intelligent insights. Many of these services, at least in the liquid securities space, are seen as commoditized and therefore a pure scale game. What are your firm’s greatest strengths as you head into the new decade? As the capabilities of industry vendors broaden, mature and demonstrate a strong business case, leaders might feel even more pressure to prove the value of retained functions. The asset management companies at risk today are likely those where leadership lacks the will to change, and who focus on the short term at the expense of long-term viability. This means things like stripping out returns due to simple-to-replicate factor-based strategies and other market betas to make it fully transparent where and how they added value. According to an Accenture study, 42 percent of survey respondents believe that their operations and technology are not currently configured to execute their firm’s overall strategy.[2]. The overall Asset Manager Directors & Officers/Errors & Omissions insurance market added yet one more challenge for asset management firms in an already challenging year. As important, they will wish to bolster their financial resources to enable more aggressive seeding of new products, optimize financing arrangements and pursue strategic growth initiatives. Old ways of working can limit an organization’s ability to gain and then keep a competitive advantage. Your email address will not be published. Clients have become hypersensitive to investment costs and have been pushing down on fees for years. Asset managers will invest heavily in API technology to enable them to “plug” into a larger provider ecosystem and unearth new business and operating models. 10. The industry’s current focus on functional expertise is set to shift towards more technical skills, as seen in a recent Accenture survey: However, this won’t be a binary shift. Clearing the fog on performance reporting. However, user experiences in one area of consumers’ lives are shifting user expectations in others, and businesses must respond. Amid all the talk of cost efficiencies from automation and AI, a perception is emerging that firms might be faced with having to decide between people and machines. The key to realizing breakthrough transformation is to create a culture that embraces ongoing change. They need to learn from other industries and match or better the types of personalized experiences those companies provide. Insurance Company Investment Trends – A Client Survey. risk and portfolio management systems, trading tools and other proprietary capabilities), will look at these “assets” as potential new business opportunities. Innovations are likely to force leaders to reinvent how human capital is deployed, but this new world might present exciting new opportunities for people and the firms that employ them. Ping An Insurance has grown to be the largest insurance company worldwide with total assets estimated at $1.25trn, contributing to the largest market cap out of life insurance … Ping An Insurance grows to be largest insurance company worldwide with $1.25trn AUM. The perception that moving increasingly to a digital and tech-enabled world means the most valuable resources are coders, data scientists and engineers, is somewhat misplaced. Becoming more innovative and changing the culture so that it embraces transformation puts operating model change in a heightened focus. The use of Natural Language Processing applications will explode across the activity chain, quickly becoming a table-stakes capability for asset managers. China Asset Management: ETF As Next Wave Of Growth, China’s asset management market is now entering a new stage as the market opens up for foreign players, Employees Of Oliver Wyman Enabling Racial & Ethnic Diversity (EMPOWERED), Students And Recent Graduates Application. This is the reason why an “asset-only” asset management approach for insurance portfolios is inappropriate. Firms are hyper-focused on challenging how functions, incurred costs, etc. For asset managers, cost takeout is likely to remain a high-priority item. Trends prompted by the pandemic have likely required insurers to contend with much more remote claims handling, formerly executed on the ground. The potential of technology to reshape the asset management industry has come into sharp focus in recent months, with COVID-19 becoming a catalyst for digital client interaction, for example. Managing Director – Asset Management Lead. Oliver Wyman Ideas offers our most recent insights on issues of importance to senior business leaders. As organizations progress towards the digital future, they’re learning that a successful user experience—which leads to the conversion of users into sustainable customers—is key to business growth. Today, some of the most prescient organizations are already using analytics to peek around the corner and anticipate their customers’ wants—analyzing patterns of behavior and using the insights from customer interests and transactions to personalize experiences in ways not possible just a few years ago. In part one of this Insurance Asset Risk / Aegon Asset Management roundtable, insurers discuss their views on the low interest rate environment and the actions they are taking on their fixed income … INSURANCE ASSET MANAGEMENT, NORTH AMERICA Provider perspective - How much is investment success really built on insurance specialization? Conning, Inc., Goodwin Capital Advisers, Inc., Conning Investment Products, Inc., a FINRA-registered broker dealer, Conning Asset Management Limited, Conning Asia Pacific Limited and Octagon … The extraordinary market moves in the first half of 2020 disrupted some of its most persistent trends, but Robert Donald and Ashley Lester explain why they … No one can be certain what the future could bring, so one key to surviving, and thriving, should be the ability to adapt and drive change at a pace unprecedented in the industry today. 4. The months that followed have, however, been exceptional. Today, the asset management industry is already moving from a world of one-size-fits-all products and services to one in which firms create custom, personalized experiences for the end-customer. Given the challenge in growing revenues, firms will look to package internal assets and capabilities, and try to sell them externally. Leaders should be attentive to the evolving demands on their company’s operating model, technology workforce and ability to drive change at speed. Executive summary Since the financial crisis, midsized insurance investment managers (IIMs) — those with US$100 billion to $500 billion in assets under management — have struggled to increase … Firms will no longer look at cost cutting as an end in itself, … To better design a more agile operating model, asset managers should confirm that an effective data foundation is in place—one that promotes trustworthy, clean data and a strong governance structure. Managing organization change is becoming a key pillar of any successful enterprise. Sustainability and climate expertise have taken on a new level of importance for end investors in the COVID-19 era. The art is in striking a balance between upskilling the people who understand the business and integrating the data scientists who need to learn it. This will lead to step-change improvements in efficiency and insight generation. This will trigger consolidation among infrastructure players to create true “one-stop shops”. Firms are diversifying their product mix and specifically chasing margin drivers—e.g., alternative investments. By looking through the value lens—both to clients and to employees—firms are expected to have a better understanding of where to unlock trapped value versus fixing value drains. online banks, fintechs) as well as traditional industry service providers (such as custodians, wealth managers), to develop new service propositions while driving dramatic efficiency gains in their operating models. Rather than plan for specific eventualities, they should continue to prepare for disruption—looking outwards in every direction. Asset managers should look at their cost structures within the context of delivering value to the organization. Firms will also need to cultivate softer skills in parallel to technological advances if they want to benefit from these beyond the crisis. This need is coinciding with substantial pressures around talent, particularly around upskilling and retention. They will make larger, bolder bets as the “cost” of maintaining too much optionality will end up being self-defeating. Asset managers that succeed could require a new mindset and new capabilities. As a priority, firms should develop holistic, “always on” capabilities to combat 24/7 machine risks (e.g., cyberattacks, algorithmic breakdowns) and human risks (e.g., conduct and compliance monitoring, anti-phishing security). ... 2019 Global Insurance Pools trends … The current situation is an opportunity to revisit and reset investment beliefs and priorities, and to place stronger emphasis on ESG and climate risk going forward. Trends in Outsourcing by U.S. Insurers In a 2017 study commissioned by State Street Corp. (a financial services provider), which included more than 100 respondents from the insurance sector, 32% of … But virtually … By ... MACSF, Ostrum Asset Management, Périclès Acturial and SimCorp . By Mike Kerrigan. 1 Trends With fixed income yields seemingly stuck in “modest” mode, US insurers have been looking to third-party asset managers with greater frequency, and with the purpose of … Firms that are able to find that balance should be in a position to keep the engine running while also seeding the transition to a new human capital model. Moreover, if insurance assets and mutual funds are included, the US asset managers held nearly USD 51 trillion of long-term conventional assets under management … 6 Insurance Asset Management Trends • Search for capital efficient yield Multi-asset strategies Commercial real estate loans Infrastructure High yield funds Cash flow matching and asset restructuring Outsourcing • De-risking of the balance sheet Multi-asset … Operating model transformation also requires reconsidering which activities are core and differentiating, and which are non-value added. This path is closely related to the previous point. Firms should identify their most important digital assets, which should be fortified with the most robust cyber defenses. Against this backdrop asset managers not only have to make good portfolio investment decisions but also to steer their businesses through considerable change, be it climate, margin or technological advancements. Firms that generate true alpha will be rewarded for this; others will find it increasingly difficult to justify their fees. The coronavirus (COVID-19) outbreak has had a significant impact on the industry and some of our ideas have become even more relevant since they were originally published. At the same time, asset managers need to be mindful that non-traditional competitors are or might be entering the market as well. The asset mix of an insurance company’s investment portfolio varies over time based on different influences, including both macroeconomic and industry-specific factors. Yet, 66 percent of asset managers say that data management is the area of their business most in need of total disruption.[3]. The focus on cybersecurity for all industries, including asset management, remains strong within the US and abroad, with scrutiny coming from regulators, business counterparties and investors. Blockchain Trends. While human expertise is still essential in calibrating NLP algorithms and “training” the models, AMs will look to deploy it anywhere people are currently spending time distilling meaning from text. Firms can no longer wait 12 months to begin to realize value from capital investments. We focus on the return and risk needs of insurance … 2020 is the year when the asset management industry could catch up with the pace of innovation in other segments—especially when it comes to innovation using data and analytics. What will the characteristics of a successful asset manager be in five years? We don’t deny that improving efficiency and cost sustainability are important, but asset management is a scale business and, increasingly, a winner-takes-all game. Technical skills aren’t the answer to all problems. Firms will be forced to make difficult decisions on what to focus on and invest in, as well as what to stop doing (and who to stop paying). Just about every asset manager has “done something” around ESG but few have yet built differentiated climate science expertise. However there is a strong case for broadening the investment set, provided there is appropriate guidance. Our calculations suggest a 5% allocation to Venture Capital in a DC scheme could increase the entire pension pot by >7% over the working lifetime of a 22 year-old. In our recent study, Reinventing Operations in Asset Management, we found that a high number of companies agreed that new revenue opportunities will provide the greatest lift to firms in the asset management industry. Bridging the valuation gap. By contrast, we believe that success could be based on a hybrid approach—what we call a “people + machines” model. High performing asset managers will drive new levels of transparency in how they report performance and thereby demonstrate their true added value, leaving others in a vulnerable position. In the scramble to “go digital” and apply “advanced analytics and big data”, many will be disappointed by the results they get from technology; not because they couldn’t secure the technical skills, but because they lost focus on the “softer” skills needed to motivate, manage and organize complex cross-functional teams that the “new world” will require. Going forward, asset managers need to design with future disruptions in mind—meaning, they need to take an iterative, agile approach. To generate dialogue about the future of asset management, and the actions asset managers should be taking most urgently, we have used our industry research, as well as interviews with leading executives, to come up with our list of the “top 10” paths to prosperity for asset managers in the coming year. We will continue to monitor how the pandemic impacts the asset management industry and we will outline how the latest developments factor into our original hypotheses over the months to come. Asset managers will begin thinking more strategically about how they manage their balance sheets and capital. Asset managers will push fee pressure down to administration and infrastructure providers, triggering a wave of consolidation. It is imperative for the organization to promote a culture of innovation and focus on incremental delivery. Those looking to demonstrate impact to society should consider this to be the perfect time to commit. Having worked in the AM industry for over 10 years, I cannot resonate with your top 10 more heartily. One caveat: Don’t fall into a hype cycle. But some firms are also looking to monetize capabilities beyond their product and asset management competencies. The industry starts 2020 in what feels like a highly fractious world, and one which is likely to lead to quite binary outcomes. NLP is already used in the AM industry, but it is typically deployed in siloed applications or remains confined to more technically-minded portfolio managers and analysts. We are one of the FORTUNE 100 best companies in the world to work for, Download Oliver Wyman Ideas App Our latest insights on your mobile device, Partner, Co-Head Of EMEA, Financial Services, And Global Head Of Wealth & Asset Management. As asset managers continue to experience fee pressure, they will increase scrutiny of their “infrastructure” providers (i.e. Change your static operating model to a dynamic, data-centric model by leveraging a playbook that puts insight and analysis at the very center of where you are and who you want to be. Additional revenue streams are likely to come from new and innovative products and distribution channels. Instead of letting clients define the narrative, asset managers will take matters into their own hands by improving the transparency of their performance reporting. Today’s operating environment for asset managers may be the toughest ever, and 2020 is likely to be a watershed year. Data needs to be at the heart of an asset management firm’s strategy today. As more and more organizations emphasize the importance of speed to market, organizations that institutionalize a “culture of change” will likely be at the top of their class. Some players will need to realize cost synergies quickly to defend profitability; while others will need look into more structural changes to their cost base to ensure that costs that have been taken out, remain out. are delivering value to the organization. Asset managers looking to capitalize on these value shifts will explicitly incorporate climate science expertise into their investment decision-making processes. AAM - Insurance Investment Management. Some asset managers are still playing catch-up to address today’s demands. Cost cutting to fund bets on the future. We see the current market stress as having magnified the importance of balance sheet strength, with liquidity issues emerging for many funds and some institutions using their own capital to support their products. This is going to change. One concerning answer: only five percent were highly confident in their ability to manage the increasing frequency and sophistication of cyber threats. Asset managers may never have imagined that they would need to provide the same “user experience” to their customers as retailers or consumer electronics companies. It is critical that leaders of asset management firms recognize that they are no longer just competing with industry peers. While the emerging trend of automation is not unique … Capital and balance sheet management enter the lexicon of asset managers. Although they are certainly critical to asset managers’ futures, delivering the desired results will also require “creatives” and people with skills and perspectives from outside traditional asset management circles. With pressure on fees and weak net flows, large scale players and hedge funds that have invested heavily in developing technology and infrastructure tools (e.g. Firms should think carefully about re-skilling and blend the infusion of data-oriented talent with practitioners who know the business. are delivering value to the organization. For more information or advice about any of the trends in asset management outlined above, contact a member of our dedicated team. In our final idea we acknowledged the need to be strategic in implementing new technologies. as well as niche versus scale operations. I would say, one of the issues that I have witnessed is that the leaders of some of the best wealth management organizations tend to push machine learning off to a esoteric corner as opposed to doing more to use it as a competetive advantage. Very well written. Adaptability also needs to be embedded in the culture, not just aligned with large programs and projects. In focus Why old market trends die hard. ), and more towards forward-thinking, predictive safeguards, particularly when assessing how best to leverage emerging technologies to mitigate or defend. Guggenheim Investments is the global asset management and investment advisory division of Guggenheim Partners, with more than $209 billion 1 in total assets across fixed income, equity, and alternative strategies. This lack of preparedness underscores the pressing need to more effectively leverage technologies like automation, applied intelligence (AI) and analytics—not only to realize cost savings, but also to increase flexibility and adaptability to support both current and future strategic objectives. While the consequences of climate change may not be fully felt for decades to come, the impact on society, the economy and regulation will create huge value shifts in the market much sooner. The general state of the global economy, industry trends… Principal, Senior Portfolio Manager. 7. … To date retail investors haven’t had the same opportunities to invest in private markets, at least in part due to client suitability and liquidity concerns. Many are not. One particular application of innovative technologies is to help improve the user/customer experience. Cost cutting to fund bets on the future. Focus first on technologies with clear and measurable outcomes in the here and now. Asset management industry trends. Keywords: insurance, long-term investment, asset-liability management, risk-based capital * Prof. Dr. Helmut Gründl is Managing Director of the International Center for Insurance Regulation (ICIR) and Professor for Insurance … 26 Thus, it was surprising that “increasing virtual claims interactions” finished as a fourth claims … Asset management winners will be likely those that embrace, engage and facilitate advanced technologies across all parts of their business—products, services, engagement and value chain. Asset management trends indicate another year of challenges Investment management is in a period of rapid change, driven by shifting investor preferences, margin compression, regulatory developments, … Part of this will be to signal financial strength and the ability to weather adverse events including operational or liquidity issues. Even the use of quantitative methods is generally a tough sell. Asset managers pass their pain to infrastructure providers. In what areas do you feel vulnerable? Asset managers can’t cut their way to scale, long-term profitability and market relevance. Our research data has also shown that evolving regulation, cyber threats, changing investor sentiment and growing interest in non-traditional assets and complex portfolios are weighing on risk managers’ minds.
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