The Future of Asset Management | Accenture

1 The Future of Asset Management Business models and strategies for 2025. Introduction 1 2 3 4 5 6. What will the Asset Management industry This paper contains Accenture 's answers to those questions. It is also grounded in Accenture research based on a recent survey of 250 Asset look like in 2025? What changes will Management executives in North America conducted to more deeply we see in areas like brand, product, understand where the industry is headed over the next few years. We have synthesized our experience and research to provide Asset managers with distribution, operations, and talent? insights to help them prepare for what's ahead. Or, more accurately, to help What will be the impacts of leading-edge them create what's ahead.

2 Technologies on strategies, capabilities, Asset managers who are likely to be in the winners' circle in 2025 will be those who understand the arc of today's trends and tomorrow's possibilities innovation, and the customer experience? and then proactively assemble the vision, strategy and capabilities needed to create their own Future . The Future of Asset Management 2. Introduction 1 2 3 4 5 6. The changing landscape Investment firms face a rapidly shifting landscape where many traditional products, tools and approaches no longer seem as appropriate or effective as they once were. We see four primary features of this landscape. Profitability Technology Innovation Mass customization The good news is that Asset managers Asset managers have a pressing need Even the most advanced technologies Successful Asset managers in the Future will drove most of the buy-side industry's to leverage technologies like automation, are, in the end, just the raw materials from need to personalize products and services total revenues (42%) in 2020 according to artificial intelligence (AI) and analytics which to create differentiating products at scale across the entire business to focus Accenture research.

3 The not-so-good news not only to realize cost savings, but also for and capabilities. What's needed, in addition, on outcomes, values, product preferences is that different profitability dynamics are in product development, alpha generation and are the structures, processes and incentives and customized communications. In our play, and a fundamental disconnect exists delivering a differentiated client experience. that can help turn technology potential survey, four out of five Asset managers state between the top and bottom lines, and From our survey, we found the biggest gap based on ideas from individuals, teams that customization for the masses will be a between assets under Management (AUM) between vision and reality to be in Asset and ecosystem partners into revenue- key growth driver over the next five years.

4 This is and revenue. Improving profitability requires managers' use of advanced technologies. generating products or services. Supportive partly because alpha is becoming more difficult a deep-capacity analysis and measurement Nearly all respondents (95%) believe that an processes and organizational structures to attain, so personalized products are emerging of the products and services that are driving Asset manager's technology, data and digital must be present to encourage constant as an appealing alternative to low-cost beta profits, and then using that data to prioritize capabilities will be differentiators in 2025. experimentation and to move innovations investing. It's also because customization can the product roadmap, identify areas with the On the other hand, many Asset managers along the pipeline.

5 Effective leadership improve the client experience and overall client highest profit margins, and assess the value are still in early stages exploration then helps promote a culture of innovation, centricity. Client centricity has traditionally of cost reduction and digitalization programs. and prototyping with many emerging where practical creativity is accepted been a narrow focus within the sales and Gaining margin would also allow firms to re- technologies, including AI. Our survey and expected as an everyday occurrence, marketing functions, but it is now rippling direct benefits for investing in Future sources found that 72% of Asset managers do not not a one-time or accidental occurrence. throughout the organization, and all parts of of growth and automating production.

6 View themselves as leading firms when a firm need to decide how they should react. assessing their digital maturity. The Future of Asset Management 3. Introduction 1 2 3 4 5 6. Creating the Future : Asset Management in 2025. What will Asset Management look like in 2025? Predictions from Clearly, the pressure to innovate our survey respondents were wide-ranging: in terms of both technology and client We will have to be more responsive to client needs on the digital level.. centricity will be intense. The shifting The personal relationship with an advisor will erode, and investors will take charge.. market and technology landscape just We will be mostly cloud-based and AI-operated. discussed, combined with intensifying Corporate responsibility will become a global priority.

7 New tools will competition, requires firms to take empower millions globally to participate. action across their business. There will be much more active investing and customization, and AI. will play a huge role in differentiation.. The Future of Asset Management 4. Introduction 1 2 3 4 5 6. In this Future -oriented analysis, we look at six aspects of the Asset Management model . not just in themselves, but also as they interconnect and interact with all the others. 01 | Brand Strategy 02 | Product Strategy 03 | Sales and Distribution You are who your customers think you are Investor expectations are changing Make the leap to hyper-relevant Almost all of our survey respondents believe that brand We found that 74% of our survey respondents affirmed customer experiences at scale is an important competitive differentiator cross-industry they are considering expanding their products and Asset managers of all types and sizes identified product (97%).

8 Yet one-fourth of respondents (26%) thinks that services outside of investment products. And 83% agree distribution as an essential part of overall transformation. the market doesn't currently see their company's brand that their firm is actively looking to expand into new In fact, 91% of our survey respondents intend to transform and purpose as being distinct from other firms. investment products and strategies. Part of this expansion their product distribution value chain within the next will be fueled by hyper-personalization, as customers look five years. Improving product distribution will be even Given the growing importance of market differentiation, for products and services tailored to their specific goals more critical as firms expand their ability to sell directly to Asset managers should clearly define and differentiate and timelines.

9 For example, a retail investor might have consumers. One concern is that, although transformation their brand and purpose, conveyed through activation different investment urgencies depending on whether of distribution will require advanced technology capabilities, of that purpose. To do this, firms will need to distinctly the goal is short term (purchasing vacation property) or fewer than one-third of surveyed Asset managers (28%) said articulate internally and externally the compelling long term (funding retirement or saving for college tuition). that their firms have fully embraced new digital advancements story about their mission and values to customers Other customers may be driven by the desire to invest such as technology platforms across the organization.

10 And employees alike. This articulation should also align primarily in businesses with sustainable practices. the corporate purpose to their customers' purpose. Achieving true client centricity depends on reimagining Such alignment, communicated across stakeholders, Traditional funds may work for some investors, while client interactions and building trust. Asset managers must means that all parties will be focused on customer others could want personalized, separately managed do more than just communicate more effectively to their goals, as supported by a company's distinct positioning. accounts (SMAs) with customized investments. end-customers. They should transform the entire end-to- Institutional investors may also seek solutions that end sales and distribution model, up to and including client By taking these steps, the activation of brand and purpose are packaged especially for them.