2021 investment management outlook

Key messages:

1. According to the results of our proprietary survey conducted over the
summer of 2020, most investment management firms indicate they have more to do in both the development of agile back-to-the-workplace plans and communication of their plans, to help employees feel more comfortable.

2. Our survey results indicate that firms are taking multiple approaches
to managing workforce costs, and that most actions were taken by the summer of 2020. The incidence of furloughs at the same rate as layoffs indicates both
optimism for a recovery on the part of leadership and creativity to deploy
less-utilized approaches to manage the workforce through COVID-19.

3. Overall, most investment management firms seem to be changing
approaches to digital transformation to support cost savings. The spending
allocations by technology are also changing in ways that appear to support the
security and efficiency of digital interaction. Some investment management
firms are decreasing emphasis on digital transformation enabled through both
vendor solutions and in-house build projects.

4. Digital transformation could become an element in many investment
management firms’ brands. Like it or not, investors may judge investment
management firms on the sophistication and elegance of their customer
interactions.

5. The experience gained weathering the volatility and personal hardship, along with the industry’s commitment to both customers and employees, will likely lead to a stronger, more digitally capable investment management industry at the end of 2021.

Transforming to thrive

The COVID-19 pandemic was the global story for 2020, but how firms recover from the pandemic and thrive in a post–COVID-19 world is expected to be the story for the investment management industry for 2021. Industry impact from COVID-19 varied widely, with investment management as a whole sustaining less damage than some other sectors of the economy. Revenues for investment management firms remained largely intact, but the people, the operations, and the technology used by investment managers were impacted.

Before the world turned upside down, the investment management industry was experiencing two important forces: the longest running bull market in history and shrinking margins at all but the most successful investment management firms.1 The market correction from February to March ended the bull market run, while operations were simultaneously thrown into turmoil by stay-at-home orders in the face of growing case counts of COVID-19. The market correction was short lived, but the subsequent recovery activities undertaken continue today at many firms.