Green field and sky of clouds with sun

Perspectives

Investment Management Industry Outlook

Capitalizing on three disruptive forces

How will changing technology, a shift in global wealth, and risk management disrupt the investment management industry over the next three to five years? Explore our report and video below to learn more.

Investment management repositioned

We are delighted to share with you our views on investment management industry trends and priorities over the next few years, based on the perspectives and first-hand experience of many of Deloitte’s leading practitioners and supplemented by original research from the Deloitte Center for Financial Services.

Making predictions is an inexact science at best, but we are seeing the emergence of a number of dynamics that have great potential to fundamentally change the investment business over the next three to five years.

This outlook is organized such that the reader will have an overview of three disruptive trends that we find are generating the most energy in client discussions:

  • The triumph of technology
  • The seismic shift of global wealth
  • The reign of risk management

This outlook is part of Deloitte’s Financial Services Industry Outlooks series, which provides disruptive trends and bold predictions over the long term for banking, insurance, investment management, and commercial real estate.

The triumph of technology

It can be a challenge for the human mind to comprehend exponential change. The human brain has experienced linear change and our brains have evolved in line with that experience. Because technology does not always evolve in a linear fashion, adoption of technology can sometimes clash with comprehension. Investment managers who want to lead should be sure to invest meaningful resources into understanding the exponential impact of technology.

For example:

  • What technology is available now?
  • What is coming down the pike?
  • How will emerging technologies impact them?

Our prediction:

Computer chip icon
Key takeaway:

Pairing advanced technologies with more traditional forms of investment management research and trading could be a powerful advantage.

The seismic shift of global wealth

In order to succeed and grow over the long term, investment managers must not only be adept at managing their current assets, they must also anticipate where their future assets will come from and what products are best suited to the needs of the client.

Investment managers also have to deal with unprecedented demographic changes, such as the aging population in many developed nations. Since demographics are a significant driver of economic growth and global financial liabilities, the aging population is being closely watched by investment managers.

Our prediction:

Key takeaway:

 

Millennials will affirm their status as the new drivers of consumption going forward.

The reign of risk management

As the investment management industry has evolved, it has become more complex. From product offerings, systems, and regulations, this complexity has seeped into the overall markets and has been seen in high profile events.

The Securities and Exchange Commisssion (SEC) has made it clear that investment advisers, their management teams, and their boards bear the ultimate fiduciary responsibility to manage risk. And, collectively, they realize that one risk incident can have a devastating effect upon their repuation and bottom line.

Our prediction:

cycle arrows
Key takeaway:

A comprehensive and detailed risk management program that fully accounts for extended enterprise risk is key to a sustainable and viable future.

Disruption forecast: Partly sunny or partly cloudy?

All of the topics in this investment management outlook are compelling enough to generate an enormous amount of debate and discussion. What does it all mean? What is the overriding impact of these trends and what should investment managers be doing about it?

The sense that the investment management industry is ripe for disruption remains strong, as well as the disbelief that there is tremendous opportunity with a simultaneous amount of risk. As always, there will be winners and losers over the next three to five years. However, the calculus as to who will win and lose is changing.

Who may succeed? The well-established, forward-thinking investment managers. It is also expected that several fintech firms, such as those using blockchain technology and some of the robo-advisers, will become successful.

There is room for a variety of types of investment managers to be successful. Large firms and small firms, those with diverse offerings as well as those with niche strategies, can all grow. Will it be the size or focus of an investment manager that determines success? Alas not. It will be the ability of each investment manager to identify the disruptive trends, prioritize, and implement an appropriate response.

Cloud with lightning icon
Key takeaway:

Who will be successful in this new landscape? Only time will tell, but those who do not embrace change may be left behind.

Explore additional resources

What’s on the horizon for the financial services industry in 2016?

  • Take a Closer Look for interviews with our industry leadership
  • Read our blog series for a Quick Look at expected industry trends
  • Banking Industry Outlook: Banking reimagined

Reimagine financial services:

  • Join our Dbriefs webcast to hear how disruptive trends will shake up the industry

Discover more Industry Outlooks

Did you find this useful?