The supermodel era: new client segments pose operational issues – Yvonne Connolly, Managing Director – Country Head

Pinpoint of view

Asset management operating models are changing. New products and new distribution models have transformed the industry. This has brought benefits and growth – but also costs and complexity. To succeed, asset managers now require leaner, more agile operating models that allow them to prioritise performance, products, distribution and clients. Our latest research initiative [i] shows that this is propelling asset managers into a supermodel era, of necessary, radical and lasting change to operating models.

In this Pinpoint of view, we explore how the pursuit of new clients, particularly in the wealth channel, is putting pressure on operating models.

Supermodel: The great evolution in asset management

Download part two: Operational Overhaul here

Accelerating to go slower

As asset managers grow – addressing squeezed margins and reduced client flows – they are entering new asset classes and new client channels.

In the latter case, they are pushing an open door. Our recent analysis [ii] shows nearly nine out of ten wealth managers (88%) expect the level of investment into private markets to increase over the next three years.

Manager priorities for revenue growth over the next two years 

And yet the operational challenges that come with entering a new client segment risk impeding the very growth it is designed to create. The faster managers hope to go, the slower they move. 

Our research shows that new client types, not least with bespoke reporting requirements, present operational challenges to traditional and alternatives managers alike. 

Alternatives managers, who typically work with institutional clients, face the greatest pressures from their move into the wealth management channel.  

“The European wealth segment is huge. If you’re not seeing growth [from US pension money] you’re going to seek out those new segments around the world – even if it involves greater difficulty.”  

Global alternatives manager 

The greater number of intermediaries in the retail or wealth markets is a notable challenge for alternatives managers. Some of our respondents were not used to fund administrators pushing data to distribution agents or platforms – or private banks requiring documentation in specific formats.  

Additionally, some fund structures are more common in some markets than others. US-based managers, familiar with a homogenous domestic market, must adapt the diverse European market with its multiple currencies, languages, legal requirements and a host of other issues. 

“Market by market in Europe, there are different distribution arrangements that cut into margin. Alternative managers are used to getting two and twenty and a very simple fund structure.”  

Global alternatives manager 

There is a startling paradox here: a business committed to growth – through new products and new clients – creates operational problems that inherently hinder that very growth.  

As managers press the accelerator, they are just as likely to decelerate. 

If these research findings resonate with you and your business is seeking to accelerate growth, please contact us on  contact@carnegroup.com

Download part two here to learn more.