The number of asset management firms will decline by half over the next 15 years and big tech companies will start to take their place as current clients grow old, new clients seek a different style of investment vehicle and the middle class grows in emerging markets, according to a study by KPMG International.
The retirement of ‘generation X’ investors and the growing importance of ‘generation Y’, along with the expansion in emerging markets, ensure that current asset management business models will be obsolete, KPMG says in its ‘Investing in the Future’ report, which makes projections to 2030.
‘We are on the verge of the biggest shake-up the industry has experienced,’ says Tom Brown, global head of investment management at KPMG International. ‘People are living longer and taking greater responsibility for their own retirement planning. Younger generations will likely save more as they see their parents run out of money in retirement. We also expect to see a significant boost of new money from the growing middle class in China, Mexico, India, Nigeria and other developing economies over the next 15 years.’
The report cites a ‘huge risk’ that global economic growth in coming years will be too slow to absorb the quantity of personal savings needed to fund a rapidly ageing population in the developed world, and predicts that the asset management industry will be dramatically affected.
The replacement of the current generation of investors with younger people will also change the nature of client demands and help ensure that highly adaptable companies, as well as companies from the tech sphere, gain market share in the industry.
‘The clients of the future will be fundamentally different in terms of their needs and expectations,’ says Ian Smith, financial services strategy partner with KPMG in the UK. ‘They will demand more personalized information, education and advice that will require asset managers to radically address their technology capabilities to really understand their clients and support this level of service.’
