TORONTO, March 18, 2011—A PwC global survey of asset management CEOs predicts a new a period of growth for their companies, fuelled by emerging markets, an aging population and a general heightened awareness among investors to put more away for their retirement. Sixty-eight per cent of the CEO asset management respondents were “very confident” about their company’s growth prospects over the next three years.
While the world economy is still in recovery in many developed markets, PwC’s 14th annual global CEO survey found that 1,200 business leaders in 70 countries are surprisingly optimistic, says Raj Kothari, national asset management practice leader for PwC. From the larger global survey, 31 asset management CEOs responded. The full report is available on the PwC website at www.pwc.com/ca/am
“Much of this confidence stems from the huge market potential opened up by an aging population, not just in the developed world, but in Asia as well. While this potential has been evident for some time, the financial crisis has created further opportunities for asset managers by accelerating the pressure on defined benefits pension plans and greater strains on public pension plan provisions. The result is increasing uncertainty over retirement income and greater readiness to put money aside,” Kothari says.
“With this new period of expected growth, competition will increase among asset management firms. Canadian firms will have to be more vigilant in reducing costs, increasing their efficiencies and adjusting their product lines,” says Kothari. “At the same time, investors will be looking for increased transparency and more frequent reporting while regulators are placing more pressure on managers to provide this transparency.”
The PwC report says that in order to encourage people to invest their growing savings in fund products rather than simply putting them in deposit accounts, asset managers will need to provide investment vehicles that combine reasonably secure income with sufficient yield to pay for longer retirements. They will also have to deal with an increasingly knowledgeable, demanding and empowered client base, which has been made more sceptical and risk-averse by the financial crisis.
Other survey highlights include:
While confident is high in the sector, there are still challenges ahead such as a customer base that is becoming savvier and more price-conscious. Regulation is increasing expenses and opening up asset managers to greater investor and market scrutiny, says Kothari. In the Canadian market in particular, consolidation between medium-sized players is a likely scenario to achieve scale, specialization and cost reduction. Outsourcing and shared services is being examined more commonly in Canada as a way of creating savings and increasing time to spend on core services, he says.
Technology will also be a crucial competitive differentiator, helping firms to control costs, improve efficiencies and respond to evolving investor demands. Greater transparency will also be critical in attracting funds by providing a clear indication of the strategy, risk appetite and performance of the funds and helping to assure investors that the business is properly controlled and governed.
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