Top 10 Themes that Will Define the Future of Asset and Wealth Management

J. Pierpont Morgan would have been proud to see that many of the historic principles of an asset- and wealth management still shape how money is managed today.

J.P. Morgan’s The first investment fund was established in the late 1800s for British financiers who wanted to invest in the new United States of America.

Our industry’s founding principle is evident in the fund’s track record of 150 years. Clients’ desire to receive personalized service and investment expertise will not change.

With this in mind, we have compiled a list of 10 key themes that will help our clients navigate the future.

1. Price:

Since I started in the asset-management business, critics have warned that fees will reduce profitability and take the top talent away from the industry.

Every industry has fees that decrease at some point. The future of success will be able to offer commodity-like products at scale at a near-zero cost or hard-to-access information and exposures at a premium. The industry must work towards continuous improvement at both ends.
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2. Scale is essential for survival

Firms face pressure to be efficient in pricing and manage regulatory requirements. They also need to invest heavily in data, analytics, and risk-management tools.

Scale is crucial in this environment. Smaller firms can refocus their efforts on their most valuable asset, talent, by outsourcing non-core and sub-scale capabilities to service providers and merging and buying.

3. Actively counseling clients

The Covid-19 crisis taught us a lot about the importance of sound advice in volatile times. Actively managed funds performed better than their passive counterparts across all asset classes and portfolios during that period.

Markets may be efficient but it is important to select the right manager and provide guidance for clients. A balanced portfolio returned 6.4% per year over the past 20 years, while retail investors experienced only 2.9%. This stark reminder of the importance of hands-on advice.
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4. Impact, purpose, and role

Portfolio managers are essential for investors who want to make a difference in the world with their assets.

More than 80% of CIOs surveyed indicated an intention to invest in socially and environmentally conscious companies. It is not enough to analyze CEOs and their managers for their vision and financial expertise.

We also need to look at the impact they have on the communities and the environment. Companies that promote positive change will see a rise in demand. This will lead to a positive cycle of asset allocation.

5. Personalization

Investors today want to be proactive and not passive in their investment decisions. They are concerned about taxes and would like to invest in companies that make a difference.

They are interested in avoiding whole industries and actively participating in the development of a company‘s strategic plan. Innovation in the industry will continue to be driven by clients having the freedom to pursue their specific goals in a highly personalized manner.
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6. Predictable incomes

Millions upon millions of investors all over the world have come to depend on their investment portfolios for a steady source of income.

Asset managers must adapt to ensure that they provide a steady and predictable income stream every month, as people live longer and have more activities, especially in retirement. The same goes for saving. It is important to begin saving at an early age.

Today, less than 40% of Americans have sufficient savings to cover an unexpected $1,000 cash expense. Our collective responsibility is to inform and guide on how to cover all life’s milestones and events.

7. Understanding China

China’s importance to new innovation and supply chains has been highlighted by the interconnectedness of the world. It is dangerous to act as a fiduciary for client capital without a thorough understanding of China.

Without a deep understanding of local economies, cultures, politics, and the reemergence of global markets, it is difficult to imagine a truly global grasp of competitive forces.

J.P. Morgan, after 100 years of experience in China, is now poised to be the first foreign asset manager that acquires full ownership of a Chinese fund manager, subject to regulatory approval. This kind of commitment will make a huge contribution to our global network for research.
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8. Technology is the driving force behind everything

Technology allows our industry to adapt to the speed and agility of change and progress like never before.

J.P. Morgan employs more technologists than Google and Facebook combined. This allows our clients and employees to be more efficient and to function in constantly changing markets. We must be innovative and forward-thinking.

Technologists and their businesses can work together in agile, collaborative partnerships that will accelerate innovation and speed to market.

9. Access

Asset managers have a global reach and an extensive range of investment vehicles. They must still be able to help first-time investors access previously untapped areas.

We are constantly looking for ways to offer more options, more choices, and more power to individuals. Investors no longer have to be large investors to access investment opportunities. Investors of all sizes should see better outcomes through the democratization of markets.
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10. New flexibility

The industry has adapted very seamlessly to a work-from-home situation previously unimaginable. As such, flexibility should increase diversity and expand talent pools.

We should not lose the apprenticeship nature of our business but we must continue to work with each other to achieve greater success.

The industry’s top winners will continue to be obsessed with their fiduciary responsibilities over the next few years. The ability to use technology and scale to provide the same exceptional experience for all investors, regardless of their capital size, is now possible as stewards.