NICSA members examined the future of asset management industry and how upcoming trends can be leveraged to drive growth during a panel discussion at NICSA’s SLF on Thursday, March 1. Paul Kraft, Partner at Deloitte, moderated the panel, which featured experts from esteemed global consulting firms.
“The target group that everyone’s trying to track down is the millennials, with a large belief that there will be a significant transfer of wealth,” Kraft said. “The question you should be asking is: are you putting the tools and technology in place to be able to serve and attract the investor class as you move forward?”
John Siciliano, Managing Director, Asset Management Advisory and Strategy Lead at PwC, kicked off the conversation with his perspective on the defined contribution, defined benefit and retail markets going into 2025. “In the United States we look at the defined benefit market from the corporate side in a modestly declining context,” Siciliano said. “Less than 40 percent of defined benefit plans remain open in this country, and only about 14 percent are active.”
Siciliano said public funds are experiencing growth in the 4 to 6 percent range, but significant development is seen in defined contributions and rollovers. “If you look today at the combined market for IRA in defined contribution, meaning 401K, 403B; it’s slightly more than a $15T market,” he said. “We look at it is as being $25T by 2025, and we see per annum growth in that market of around 13 to 15 percent.”
And while pricing and liquidity challenges may exist around the implementation of new multi-asset products, Siciliano said they will ultimately be resolved. “You’ll begin to see a very different kind of product set, and in fact, certain firms already offer a very liberated multi-asset product,” he said. “We think that’s going to continue.”
ETFs will continue to assume a large portion of asset managers’ product mixes. “We crossed the $5T mark globally at the end of December, of which a little under $4T is in the U.S. and Canada, and you’ve got a more than a trillion in the rest of the world,” Siciliano said.
“One of the things ETFs have done is help democratize the money management business, because they’re so portable,” he said. “You’re going to begin to see these ETFs as low-cost opportunities/points of entry for folks to invest in the markets.”
Frank Strauss, Managing Director at Accenture, discussed the role of outsourcing in new product releases. “This industry, historically, has not been at the forefront of innovation, and we’re paying a little bit of the price for that as we try to catch up in many areas,” Strauss said. “Outsourcing is playing a major role in that.”
Strauss said time is of the essence. “When you think about the new flavors of active ETFs coming out, the CITs, the liquid alternatives, speed to market is so critical,” he said. “New products are coming out at a very fast pace, and if you’re not an early adopter, that train can leave the station without you.”
To accelerate time to market, consider a partnership. “With the pace of change that’s out there, oftentimes starting from ground zero it makes a lot of sense to find an outsource partner who can help you get off the ground, whether you’re creating a new product, entering a new geography or investing in new asset classes,” he said.
Jib Wilkinson, Principal, Deloitte Consulting, focused on the role of analytics in the future of investment operation. “On the technology side, if you look at cognitive technologies — whether you want to call them AI or analytics — there’s big growth in that space,” he said. “We’re starting to break apart front-office investment processes around portfolio construction and research, and determine how we can apply technology to those to advance capabilities.”
Wilkinson said firms will increasingly adopt what Deloitte has coined “alternative data,” or non-financial data sets like satellite imagery, social media feeds, geospatial information, news feeds and more, to gain additional insight. “That’s one of the trends we’ve seen starting to grow,” he said.
Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the NICSA event panel, they do not necessarily reflect the views of NICSA or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.
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