In today's uncertain economy, it's critical for investment firms to adapt and constantly reassess their growth strategies
Wealth management and asset management firms anticipate shifting economic times ahead, with almost three-quarters expecting a recession in the next 12 months. As such, the majority of survey participants for each industry estimate conservative market growth of 5-8% over the next year.
Ongoing rate hikes, uncertain market performance, geopolitical tensions, and increased competition all contribute to overall cautious economic predictions.
Recruiting top talent and implementing technology are key concerns for both industries. About two-thirds of both industries (66% wealth, 69% asset) list employee recruitment as one of their top concerns, and asset management firms note that talent management is their most important strategic focus. Also, asset management firms are ahead of the curve in recognizing how technology can assist and automate tasks for employees, while wealth management firms are also focused on new client acquisition and cultivation.
"Asset management firms recognize the important role technology will need to play due to the ever-increasing complexity of investment opportunities and client demands," says Ron Niemaszyk, partner for Wipfli's wealth and asset management practice. "New and older generations of clients are increasingly comfortable with technology, and expect firms to provide a level of reporting on metrics well beyond that of monthly returns. Investors are now looking for insights into their portfolios' risks and exposure to ESG initiatives. Firms who begin offering this type of reporting now can establish an edge in client acquisition over less progressive competitors."
Adopt and reassess growth strategies
The ‘State of the wealth management 2023’ and ‘State of asset management industry 2023’ reports both suggest that in today's uncertain economy, it's critical for firms to adapt and constantly reassess their growth strategies.
The most important strategies for asset management firms are talent management (74%), data analytics/AI (73%), automating processes to extend geo reach (71%), cloud adoption (71%), and exploring new revenue streams (70%).
Most wealth management firms surveyed listed new client demographics as a key priority, but the majority also reported making no changes to their client acquisition strategies. In addition, offering employee flexibility was seen as key to addressing recruiting concerns, yet 64% of wealth respondents also expected employees to work in the office five days a week. Workplace flexibility and increased employee benefits will be key for firms to attract new talent, and wealth management firms should ensure that their growth plans align with their overall goals and initiatives to avoid contradictions in their strategies.
Firms that cite employee recruitment and retention as a top concern are addressing their staffing challenges through multiple strategies, from implementing technology to take over routine tasks (51%) to revamping recruiting methods (35%) and offering increased benefits and perks (34%). Significantly, many firms are turning to employee training and development as a key retention tool. More than a third of firms (38%) say they offer leadership development programming for employees, while an even greater percentage (40%) support career development pathing for their staff members. Impressively, 62% of firms report having a documented, comprehensive employee development plan that is updated annually, while another 34% have at least a partial employee development plan in place. These talent development strategies should be applauded – and even further developed, wherever possible, says the report. In fact, firms should take steps to make career development, mentoring, and coaching an essential part of their workplace culture. And they should market these opportunities actively.
Asset management respondents are experiencing a massive shift in how technology is applied in their day-to-day operations. Three-quarters of asset firms surveyed named ‘managing and implementing change’ as the top factor driving their goal achievement. With the onset of industry-changing technologies like artificial intelligence enhancing their work, asset management firms know they are on the precipice of a new era.
Technological integration is transforming how wealth management and asset management firms do business. In both industries, some firms are already using technology to support more efficient client onboarding and account management processes, as well as using data analytics to inform business decisions. Eighty-three percent of asset management firms are using business analytics to support data-driven decisions, and 58% of wealth management firms have increased their use of analytics in key business strategies.
