By any measure, the asset management and private banking sectors have been seriously affected by this period of turmoil. It is not just the result of a profitability crisis, but more a reflection of deep structural issues affecting the core beliefs of the segment. In response the CEO agenda should be built around three priorities: stabilising the business, restoring operating performance and repositioning the organization for the future.
The combination of market underperformance, falling AUMs and clients’ demands for simpler, “safer” asset classes is precipitating a dramatic decline in revenues, and shifting clients’ expectations from “asset” management to “risk” management. The European asset management industry alone saw some €7 billion wiped off its bottom line in 2008, as revenues plummeted and costs remained fairly static or even grew in absolute terms. To return to 2007 levels of profitability, asset managers need to reduce costs by 30–60 percent, depending on the trajectory of revenues in 2009. Costs need to be cut not only in the support functions, but also in investment management and sales. Additionally, players have to cope with the increasing power of distributors (although for bank-owned entities the battlefield is deposits), increased regulatory intervention and ownership changes. Finally, a new wave of consolidation in asset management will occur. Strategically, consolidation might be the best option for some sub-scale players to turn around their performance and for high performers to buy assets and move forward to the next league. The current issue is that valuation multiples are at low levels. New organizational configurations are being mooted, with private equity involvement.
What skills are needed?
From a board perspective, we expect more appointments of financially literate non-executives to asset management boards in strengthening business oversight, enhancing risk awareness and challenging incumbent managements. At the senior management level, turnover is beginning to increase as boards emphasise efficiency and cost management over growth. Risk management needs to be revolutionized. In portfolio management, we expect strong demand for asset allocation and credit skills, particularly in distressed security investing. We also see potential for team lift-outs. In sales and marketing solutions orientation and a more self-starter culture will prevail, focusing on serving clients, rather than pushing products. Lastly, compensation packages are being re-thought.
How can Egon Zehnder International support the wealth management industry?
Egon Zehnder International’s global Wealth Management Practice consists of a highly professional team around the world who partner with senior executives of organisations in all sectors of asset and wealth management to address hiring needs and assist with the assessment of existing management competencies, and to support boards of directors. Over 35 consultants worldwide are dedicated to serving clients in the wealth sector.
The management of high-performance teams with the varied technical backgrounds needed to steer companies safely through the crisis also poses particular leadership challenges in strategic, talent and human resources management. With our well-established
Leadership Strategy Services Practice including our unique
Team Effectiveness Review service, we are particularly well placed to support wealth management institutions, boards and top management teams in these challenging times.
How we operate
Our unique one-firm approach, which facilitates collaboration across geographical practice boundaries, enables us to bring highly skilled and experienced teams to the table, with proven expertise tailored to meet the needs of clients and achieve credibility with candidates and opinion leaders around the world.
By focusing on people and skills management in the context of a specific strategy, we help wealth management institutions to rethink their organizations and their winning value propositions.
