The year 2020 was a tumultuous one for society, the global economy, and asset and wealth management (AWM). After years of steady growth, the industry’s asset base was whipsawed by rapid financial market movements and the volatility will likely be a feature for some time to come.
Even when vaccines and treatments help us stamp out COVID-19, we won’t be going back to the world as it was. At this moment of inflection, AWM leaders like you have an opportunity. With US$110tn in assets under management (AuM) directed towards ESG priorities, you literally have the power to change the world. On your own, and in partnership with key stakeholders, including governments and portfolio companies, you can make a difference across three of the most critical priorities facing the world today, and use that power to shape the future:
- Funding the future: AWM firms can channel capital and target investment opportunities to lift economies out of recession and sustain superior fund returns.
- Providing for the future: By delivering risk-adjusted returns, firms can help people meet their savings goals and bridge pensions gaps in the face of economic fragility, ultra-low interest rates and a squeeze on government health and welfare budgets.
- Embracing ESG as the future: For some investors, financial return will remain the sole priority. However, a growing number of investors expect AWM organisations to make environmental, social and governance (ESG) issues integral to their investment strategies. This shift is already having a revolutionary impact on product design, fund allocation and performance objectives.
As an AWM leader, your central challenge is to be a meaningful part of the solution while also meeting your fiduciary obligation to optimise returns. Many investors will no longer accept a trade-off. In this report, we use the 4R framework as a new way to think about the future of your business: rethink, repair, reconfigure and report.
A new way to think about the future of your business
As you think about the future, it may be helpful to have a structured way to think about your organisation, operating platform and overall business. At PwC, as part of our Future of Industries project, we have determined the four key categories and areas of focus to consider as you prepare for tomorrow.
Rethinking the future
AWM can accelerate the turnaround by funding the future, can safeguard the future by providing for it and can change the future for the better by embracing ESG. How to do this, though, raises questions about not only investment strategy but the underlying purpose of your business. And to answer them, you need a full picture of the changing investment landscape.
Funding the future
Providing for the future
Embracing ESG as the future
«We believe the industry can rethink the future across three critical priorities: funding the future, providing for the future and embracing ESG as the future. Asset management firms have the power to influence the future and leave a better world to following generations!»
Repairing what’s not working right now
The operational upheaval and market turmoil of the past year have exposed weaknesses for AWM firms, such as cost inefficiencies and a lack of digital engagement and real-time reporting. The first stage of delivering on your rethink will be fixing these problems.
We advise five key repairs to set a solid foundation for the future:
Calibrate quickly with clients
Sharpen digital connectivity
Clear out the legacy
Rationalise portfolios
Outsource your noncore operations
Reconfiguring to pull ahead
Basic repairs can only get you to the competitive baseline. Meeting your new objectives over the long term requires you to reconfigure your investment philosophy, investment execution and relevant capabilities.
Align your investment philosophy
Ensure you have the scale and focus to deliver
Engage with a wider ecosystem
Digitise your target operating model
Equip your workforce for new demands
«One must not forget that the future generation not only demands businesses to act responsible but also wants to act responsible themselves. Asset Managers should make sure they have the products and services in place to enable them to do so.»
Reporting to rebuild trust
Everything you accomplish in your rethinking, repairing and reconfiguring can be amplified by reporting. Not only is reporting an opportunity to strengthen engagement and trust with clients, shareholders and even government entities, it’s also an opportunity for you to set a standard in the market.
Engage with society and demonstrate your purpose
Engage with regulators
Engage with clients, shareholders and limited partners
Your defining moment
In a world facing uncertainty and upheaval, AWM can be a powerful engine of recovery and a force for good. Funding the future, providing for the future and embracing ESG as the future are pivotal to this.
Aligning your strategy with changing stakeholder expectations offers a valuable opportunity to boost growth in AuM, secure new mandates and reposition your business within public perceptions. Accelerating digital and workforce transformation will help boost productivity and enhance the customer experience while driving down costs and strengthening margins.
The changes you make must be fundamental, not marginal. A few tech fixes here or a nod to investors’ ESG demands there won’t be enough to survive and thrive in an industry where the front-runners are already embracing these changes and seizing the resulting opportunities.
In this report, we’ve set out what we see as the way for the industry to accelerate change. Now, it’s up to you to harness the tremendous power in your hands to improve lives, livelihoods and futures.
Contact us
Jean-Sébastien Lassonde
Partner, Assurance, Swiss Asset & Wealth Management Leader, PwC Switzerland
Tel: +41 58 792 81 46
Partner, Sustainability & Strategic Regulatory Leader, PwC Switzerland
Tel: +41 58 792 45 23