Wealth firms want asset managers to step up specialist support

Wealth managers are increasingly calling on asset managers to expand their teams of product specialists to navigate the growing complexity of investment offerings, according to a recent survey from the Money Management Institute and Broadridge Financial Solutions.

The survey, which gathered insights from both wealth and asset managers, revealed that 74 percent of wealth managers believe asset managers should increase their focus on hiring product specialists, marking a significant rise from just 38 percent in 2023.

According to the report, which was presented to attendees at MMI's annual three-day conference this week, wealth firms' call for specialists comes as asset managers diversify their product lines to include more non-traditional options, such as private markets and alternative investments. While 60 percent of asset managers plan to invest in specialized teams, the survey highlights a disconnect between what wealth managers want and what asset managers are currently offering.

"Product lineup is one of the top three characteristics that sets best-in-class asset managers apart from others," Craig Pfeiffer, president and CEO of the Money Management Institute, said in a statement. "Building and resourcing the right product specialist teams will be instrumental in helping asset management firms stay ahead of the curve."

One key finding from the survey revolves around the increasing interest in direct and custom indexing, driven by wealth managers looking to enhance tax efficiencies and cater to clients' specific investment preferences. However, 49 percent of asset managers have not yet ventured into this area. Among those without a proprietary direct or custom indexing solution, 60 percent have no plans to introduce one, despite nearly 90 percent of wealth managers signaling that they plan to expand or launch these offerings in the near future.

The survey also revealed that wealth managers are moving away from traditional mutual funds. Fifty-one percent of wealth managers indicated that they want asset managers to flip existing mutual funds into active ETFs or create ETF look-alikes, yet only 35 percent of asset managers have committed to do so.

"The investment management landscape is rapidly evolving due to an influx of younger investors and unsteady markets forcing wealth managers to look at newer, non-traditional products for alpha generation," said Tim Kresl, principal of distribution insight at Broadridge. "Asset managers now more than ever have an opportunity to provide innovative products and onboard the right talent to meet the demands of today's investor."

Broadly speaking, both wealth and asset managers agree on the growing importance of alternative investments. A majority of wealth managers (83 percent) and asset managers (65 percent) see these products as an integrated part of a client’s overall portfolio, rather than standalone investments. Despite this alignment, asset managers appear more cautious in adopting liquid fund wrappers, with only 49 percent offering or developing alternative investments in that space, compared to 78 percent of wealth managers who see liquid fund wrappers as a key growth area.

In addition to evolving investment products, artificial intelligence is also on its way to becoming a central tool within the industry. The survey found 93 percent of firms allow some use of AI, with 79 percent actively leveraging it in areas like business intelligence, client service delivery, and marketing. Nearly all respondents (99 percent) who use AI report improvements in efficiency and productivity, and 80 percent expect AI to play a major role in their operations over the next two years, particularly in back-office functions and employee productivity.