Are Asset Managers ready for a downturn?

I had first-row seats to the 2008 financial crisis.

Halfway through a meeting with a Wealth Manager, every BlackBerry in the room went wild. A few seconds later, the client team was out the door, mumbling apologies and muttering about the end of the world. It was September 2007, and long queues were forming outside Northern Rock branches in the UK.

One of the few economists who predicted the crisis was Nouriel Roubini. A decade later, he identified 10 reasons why the world economy could be headed for another downturn by 2020. This month, in a Project Syndicate article, he cited that 9 of these reasons are in force. Whether you share his views or not, it seems prudent to assess your firm's readiness.

Outlook for Asset Managers

For Asset Managers, things don’t look great. PWC’s 2019 CEO survey paints a picture of a nervous industry. With up to 20% of fees under threat due to proliferation of ETFs and lower-fee products, a further pressure on Assets under Management (AuM) would be most unwelcome.

There are reasons for optimism. Many Asset and Wealth Managers acknowledge the digital opportunity presented by the Cloud, Analytics and AI. This can improve efficiency and Customer Experience (CX), for example by enabling a Hybrid advisory model.

Performance attracts assets; Service retains them

It pays to remember that “Performance attracts assets - but Service retains them". When a downturn takes hold, investment performance tends to go down - dragging down with it AuM and fees. At that point, client retention takes cent-re-stage, and firms with superior CX enjoy a significant advantage.

Back in 2007, the Wealth Managers were rushing to react to events and reassure investors. If they had today’s CX tools at their disposal - e.g. an intelligent portal or app - would they panic so quickly?

Technology can’t stop downturns - but it can help us manage its aftermath.