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The Actuary The magazine of the Institute & Faculty of Actuaries

Asset managers facing ‘existential threat’ due to short-term planning

Many asset managers are wrongly focused on one-year planning and are failing to achieve sustainable long-term value, leaving them at serious risk of 10-year existential threats.

Firms need to see value differently ©iStock

The warning was published in a new paper by Willis Towers Watson’s Thinking Ahead Institute (TAI), which argues that asset managers are too distracted by short-term pressures.

It states that successful firms will need to be more client-focused, and seek to create value with and for a wide range of stakeholders, such as employees, investors and communities.

The paper also ranks the greatest challenges facing the industry, such as new fee models, margin and growth headwinds, changes to technology, and new strategic relationship models.

“The practice of many firms is centred on execution of one-year business plans. This is running existential risks given the conditions that appear to be developing," the report says.

“We think asset management firms need to see value differently. This includes both the ‘what’ and ‘how’ of value creation, with more use of collaboration and co-creation models.”

The paper also argues that culture will be critical to the attraction and retention of talent, helping to motivate workers, inspire strong performance, and ultimately create value.

And it states that diversity and inclusion must be central to this, with staff from diverse backgrounds said to produce deeper cognitive inputs, wider perspectives and better decisions.

However, the researchers warn that only a small proportion of asset managers have measured and actively manage their own culture.

They recommended that business leaders actively promote and manage their culture, linking this with their organisation’s overall vision and strategy.

“But perversely, many firms are so hard-wired to the use of precise measurement that they omit culture altogether in their strategy,” said TAI global head of investment content, Roger Urwin.

“We see culture as a big differentiator in determining the successful asset management firms of the future, and that diversity will become a cornerstone of the asset manager culture.” 

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