Optimism within the UK asset management sector has risen compared with the previous quarter, according to the latest survey from UK business lobbying group the Confederation of British Industry (CBI) and PwC Financial Services.
The survey also finds that organizations within the sector are now turning their focus to grappling with new regulation – particularly Mifid II, cutting costs, reducing overheads and dealing with increased competition.
Elizabeth Stone, asset and wealth management leader at PwC UK, tells IR Magazine about the impact and importance of Mifid II: ‘We know the key goal of the regime is to radically strengthen both market integrity and investor protection, and we are seeing firms meet this challenge head-on by emphasizing strategy, change management and operational efficiency. This mix will ensure they are best able to realize the opportunities, of which there are many, that Mifid II brings.
‘The shift that Mifid II necessitates, however, means asset managers must remain mindful of the impact the regime has on processes, documentation and IT systems, and continue to put strategic reflection of their own services, products and customers at the heart of their business.’
On the broader findings of the survey, Stone adds: ‘While it’s true to say that there are significant challenges for the sector, not least from cost pressures and increased competition, the latest results suggest a cautious optimism. Firms are reporting confidence in their operational resilience, which may be due to the sector’s Brexit planning meaning that an imminent Brexit will have less of an impact than in other areas of financial services.’
But Stone notes that pressure on fees and demonstrating value for money will continue to test the sector: ‘To date, sector infrastructure models remain largely unchanged and have been less impacted by disruption when compared with other financial sectors. As a result, we are yet to see the substantive flow-on of cost savings and efficiencies that could stem from disruption.
‘To counterbalance this, firms must prioritize articulating their strategy and value proposition, and look to invest more in technology and upskilling their people.’
The survey shows that the increasing move toward a more technology-driven model is changing the skillset of investment managers. This is resulting in an increase in spending on training, as firms start to reskill their people to fit the new business model.
Companies are also starting to invest in new technology – such as artificial intelligence – to enhance the customer experience, following the trend set by other sectors, and to support this uptick there is a drive to increase spending on IT more generally to boost efficiencies and speed.
Additionally, now that distribution channels are better established and working well, investment firms are able to put more focus on the use of innovative technologies to disrupt the way they use their CRM to engage with customers and third parties.