The asset management industry is facing a number of pressures, ranging from tougher regulation to stronger competition, alongside a strong need to modernise or risk losing market share to digital savvy disrupters. However, fund managers have been criticised for being too slow to adopt technology. A recent survey by the FT showed only 27% of Wealth Managers offer Robo Advice and only 31% use big data.
This growing competition stems from Fintech start ups and passive Investment vehicles such as index trackers and exchange traded funds (ETFs), which have grown at record breaking levels. Fidelity has recently joined the ETF rush by launching two new products, as they believed there was significant scope for growth for strategies that combine active and passive techniques. Vanguard has also released a new B2C Platform, in which technology will have an important role, but they have made it clear that the human adviser will be here to stay.
The opportunities and threats posed by Robo-advice and Fintech was the topic of BRUIN’s recent Breakfast Forum, held with Nick Blake, Head of European Marketing & Product, at Vanguard Asset Management. The discussion considered whether technological disruption was inevitable in financial services, how Fintech will impact profit margins, and if ‘robo-advice’ means the death-knell for traditional advice.
What became clear from the session is that Fintech needs to be moved up the agenda, particularly within the institutional asset managers that fail to take it seriously, who run the risk of losing out to competitors that embrace and are able to adapt to disruptive technologies.
Further challenges that await the asset management industry are related to the rising cost of regulation. In response to regulatory requirements under MIFI II, Calastone said it had successfully used Blockchain to buy and sell mutual funds under test conditions, in a move that would spur a revolution in the asset management industry by cutting costs and improving technology. Blockchain (the technology that underpins Bitcoin – online public ledger) could be used to create a one stop marketplace for trading and investing.
AP1 (Swede’s state pension fund) and Ikea have committed 520million to new environmentally friendly funds created by Osmosis, a London based boutique. Mikael Angberg (Chief Investment Officer, AP1) commented: ‘The efficient use of scarce natural resources is key to addressing global climate challenges and contributes to long term economic returns’.
Throughout Q2 we have seen a significant number of retail and wholesale Sales Manager and Sales Director hires, whilst the institutional sales space has been fairly stagnant. Asset managers have been bulking up their business development capacity to the UK and the mainland Europe, as a result, experienced Sales and Marketing professionals with an additional European language have been particularly sought after. Channel Marketing Manager roles have also been in high demand, and following on from the previous quarter, we are still seeing a requirements for candidates with RFP experience at all levels.
On the temporary and contract side, there has been a significantly high demand in experienced Event Managers, which has also led to an increase in the conversion of temporary to permanent hires, in order to meet the demand of events organised in Q2 and Q3.
M&A activity to date has meant that there could be a lot of instigated moves across all levels of distribution. With new corporate structures and previously mentioned senior hires, several organisations will be restructuring their sales and marketing teams. This could open up a lot of opportunities in the market and allow for companies to hire on both a greenfield and replacement basis. One area in particular that we see this happening in, is internal communications; this is to ensure that the employees of merging firms are integrated and kept up to date efficiently.
The knock-on effects of the election and Brexit will again be a significant area to watch. Similar to the Bank of England’s demand to know the plan of banks in the event of the proposed ‘hard Brexit’ by 14th July, we can expect to hear more proposals from investment management firms in the coming months. As Investment Week highlighted, larger companies such as Ashmore and Schroders are yet to reveal their position, whilst LGIM and M&G who have strengthened their hold in Dublin and Luxembourg respectively, with LGIM choosing Dublin as their HO, and Nomura and Daiwa opting for Frankfurt.
MOVERS & SHAKERS
It has proved to be an interesting second quarter, with various moves in the senior distribution sales space. Several prominent Investment Management houses have hired in the distribution sales space with some houses making team hires.
In Q2 there were several announcements of mergers and acquisitions amongst investment houses. The high profile merger between Janus Capital and Henderson Global Investors was successfully completed seven months after the initial announcement. The combined entity now stands with around $331bn in assets under management.
From an acquisition perspective, Invesco have expanded their ability to meet client demands for passive products across Europe and globally by acquiring Source, a leader in the ETF space bringing on board an array of different funds.
More recently, Aberdeen Asset Management and Standard Life approved the proposed £11bn merger which is due to complete on 14th August. The planned merger will create Europe’s second-biggest fund manager, with £660bn under management which we expect would create room for new hires. This may cause uncertainty internally as with all mergers comes change; however, this change could bring forth new talent.
Following on from Janus Henderson’s recent merger, they announced two new recruits within their distribution arm, similarly, Milton Asset Management and Liontrust Asset Management made double hires within their teams. Following the M&A trends on the buy side, the distribution teams have seen various internal restructures resulting in requirements for senior hires.