Individual investors to shape asset management
The global asset management industry will drop below 2 per cent by 2020, and 120 per cent of new net flows into investment strategies will come from individual investors, up from 90 per cent in 2014.
Such was the finding by management consultant to asset managers, Casey Quirk and Associates LLC, which said that individual investors will account for all of the net organic growth for the rest of the decade, taking in a significant amount of net redemptions from institutions.
In a white paper titled, ‘The Roar of the Crowd: How Individual Investors Transform Competition in Asset Management', the consultant firm attributed this shift to Baby Boomers entering retirement, sovereign fund dynamics, and insourcing, where large asset owners can hire their own portfolio managers to run passive portfolios in-house.
Retirees would be withdrawing their accumulated savings from individual investors, and the global rollover marketplace would swing investment decisions back to the individuals.
Consequently, individual investors would change the asset management industry from a product to a service industry.
"Already, US financial advisors - the most varied and complicated distribution channel in the world — report that two-thirds of their service requirements involve portfolio-related questions: technical conversations about objectives and risk with clients, macro viewpoints, thought leadership and allocation discussions," the white paper said.
Furthermore, 70 per cent of US financial advisers want more investment-oriented, resource-intensive advice from asset managers, echoing global sentiments.
But distributing to individuals is at least one-third less efficient than selling to institutions, thus decreasing leverage.
"Going forward, asset managers will face growing competition from larger financial services firms and will only prove their value by offering differentiated value propositions, strong performance, especially in outcome-oriented investments, and the brand to back it up," partner at Casey Quirk, and co-author of the paper, Benjamin Phillips said.
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