The headline figures for the asset management industry in 2023 look good – AUM growth of 16% in North America and a global 12% rise to almost $120 trillion following 2022’s 9% decrease.
But beneath the surface, the picture is less rosy with revenues up just 0.2% and costs up 4.3%. Profits fell by 8.1%. And a new report from Boston Consulting Group suggests it’s a trend that could well continue.
There are several reasons including pressure on fees, rising costs, investor preferences, and that for almost 20 years revenue growth has come from levels of market appreciation which cannot be relied on in the future.
The average fee in 2023 was 22 basis points, falling from 25 bps in 2015 and 26 bps in 2010. Acceleration of fee compression is a key pressure for asset managers. Meanwhile costs have grown 80% since 2010 at a CAGR of 5%.
Investors are also opting for passive products more often. Passive attracted 70% of total global mutual fund and exchange-traded fund net flows (about $920 billion) in 2023. During the 2019-2022 period, 57% of net flows went to passive.
Finally, just 37% of new mutual funds launched in 2013 still existed in 2023, and the development of new products are often not successful.
The BCG report highlights how the use of generative artificial intelligence is an opportunity for asset managers.
“The structural challenges facing the industry will only continue to grow,” says Dean Frankle, a managing director and partner at BCG, and coauthor of the report. “To remain competitive, asset managers will need to seize the opportunities offered by artificial intelligence and double down on investing in enhanced productivity, product personalization, and the opportunity of private markets.”
Key findings from BCG’s global survey of global asset managers in the first quarter of 2024, in partnership with the Investment Company Institute (ICI) and the CFA Institute include:
“Generative AI opens up tremendous potential for innovation within the asset management industry,” says Peter Czerepak, a managing director and senior partner at BCG, and coauthor of the report. “Achieving results will require strategic thinking and the ability to execute at scale. With traditional sources of growth slowing down, it’s imperative for firms to move forward on this journey.”
The report Global Asset Management Report, AI and the Next Wave of Transformation is available on the BCG website.
“While harm certainly occurred, it was not the cataclysmic harm that can justify a nearly half billion-dollar award to the State,” Justice Peter Moulton wrote, while Trump will face limits in his ability to do business in New York.
Sieg, 58, was head of Merrill Wealth Management, left in 2023 and returned that September to Citigroup, where he worked before being hired by Merrill Lynch in 2009.
Technology can do a lot of things, but advisors still have undeniable value
Two longtime RIA industry figures have joined the board of directors at TaxStatus, a fintech company that garners thousands of IRS data points on clients to share with advisors for improved financial planning oversight and time savings.
Morningstar's analysis found that the WISH Act would have a positive impact on reducing the shortfall of funds retirees will experience, with the largest impact on single men and women.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
