Top Five Distribution and Product Trends in Asset Management
In its 2016 survey of global asset managers, J.P. Morgan identified five product trends in asset management impacting the industry in the years ahead.*
The U.S. and European markets remain the primary focus of asset managers, but they recognize the vast potential for growth in Asia. One of the most formidable obstacles is the upfront cost involved in establishing a foothold in these markets, especially China. Of particular concern are the restrictions in place on the ability to sell non-local product in China and Hong Kong—a barrier to tapping China’s $1 trillion fund market. One approach to overcoming this impediment is to team up with local players, or establish Hong Kong-domiciled funds, but asset managers believe that it will take 10 to 15 years to build out a meaningful presence.
The growth of ETFs and alternatives has continued to capture the headlines and the attention of asset managers’ product development teams. However, the more important trend may be the blurring of lines between active and passive strategies (e.g., smart beta), and alternative and conventional products. More than 42 percent of managers believe that multi-asset solutions will see the strongest growth over the next five years, while more than 35 percent think that the biggest growth will be in passive and smart beta strategies.
Asset managers see advisors splitting into two camps: RIAs, which will gravitate to offering more sophisticated investment products; and broker/dealers, which will look to develop more sophisticated services. The number of additional regulations globally has many asset managers deeply concerned about the potential costs and regulatory complications they present.
With new regulations emanating from different jurisdictions with their own implementation timelines, a single distribution platform for multiple markets becomes increasingly more difficult. As these barriers are raised, larger asset managers with local distribution partners are better positioned to thrive.
Many asset managers view increasing regulations and the emergence of fintech as linked challenges, but not without their opportunities. Robo-advisors are being employed to service smaller accounts to cut costs. Some asset managers have used this opportunity to partner with a robo-advisor, or build their own platform to meet the needs of smaller individual investors who may be excluded from traditional advice channels.
Asset managers believe that robo-advisors won’t disintermediate them, but will raise the service expectations of its customers, to which they will need to respond.
See referenced disclosure (2) at http://blog.americanportfolios.com/disclosures/