Macro trends forcing change in the investment management industry – TechCrunch

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Power in the The investment management industry is turning to money holders as money managers, driven by several major economic, social and political trends.

Collectively, these are compelling forces that meet a moving object: the traditional structure of the asset management industry. Below are five key trends impacting the investment management industry.

A new group of underserved customers

In the United States, women are expected to control up to $ 30 trillion in assets over the next three to five years, and millennials $ 20 trillion by 2030. New policymakers will expect this. that the industry reflects a better gender balance and is more accessible.

Women and millennials tend to invest differently than the previous generation of older men. Millennials are both more risk averse and more socially aware when selecting investments. Additionally, because they came of age during the financial crisis, millennials have a negative perception of some of the traditionally dominant financial services companies. Changing values ​​in the investor base help explain the popularity of ESG investing.

Image credits: BCG Center for the detection and exploitation of the future

Additionally, dispatchers are becoming much less tolerant and unwilling to condone the toxic cultures of sexual harassment and discrimination, which have been tolerated for years by some predominantly male-led investment managers. Our view is that as the culture and preferences of dispatchers change, so does their investment criteria and tolerance for bad behavior.

Venture capitalists present our industry as cutting edge technology investors, but many of us use the same infrastructure tools that we have been using for over 20 years.

Millennials are “inherently wary of authority, so the traditional model of the financial advisor won’t work for them,” said Suzanne Ley, formerly head of financial institutions at Westpac. “They demand full transparency in all aspects of their lives, so hidden / opaque fee structures will not be tolerated. They also have a strong propensity to change jobs more frequently than previous generations, so the portability of financial assets is going to be very important in the future, ”she added.

Geopolitical risk leads to capital flight

Political volatility is not good for savers and beneficiaries because it tends to destroy asset value. Part of the new Cold War between the United States and China is ideological, but it is also largely about technological dominance and cybersecurity.

The new cold war only increased the flow of capital to regions of relative stability. Fear of totalitarian regimes or anarchy in China, Russia, the Middle East and South America has millions of well educated and wealthy citizens seeking to protect themselves and their nest egg. We are seeing the first net outflows of private capital into emerging markets due to a sense of risk aversion and the risk of rate hikes in the US and Europe. Even though the economic outlook in the United States is negative and the COVID-19 response inadequate, the country remains relatively stable. With countries like Switzerland, Singapore and the UK, the US remains an attractive safe haven.

Pension funds and wealth management funds have a great opportunity to expand their geographic footprint. As the traditional markets of Europe, the United States and Japan are saturated, India, for example, provides the ideal environment for the growth of a new wealth management industry. The combination of a strong middle and upper middle class, a well-educated professional class, a market economy and an expansion of available wealth will drive the demand for wealth management products, both in the institutional and commercial spaces.

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