Margins of asset management firms have declined significantly in the past 10 years, according to a report from kasina. In 2000, operating margins stood at 39%. Today, they are 29%. And net margins, 27% 10 years ago, are now 20%.

Fund company executives can expect the competitive landscape to become even more challenging, since the industry is maturing, said Eric Daugherty, director of research at kasina and a principal of the research and management consulting firm.

“This compression is exactly what we would expect to see in a maturing industry,” he said. “Competition and a shift from easy growth of the market to fighting for a share of a slower-growing pie, mandate shrinking margins. It happens in all industries eventually and will continue in the U.S. financial services industry.”

Exacerbating this natural course of events will be slower U.S. economic growth over the intermediate term, kasina added, as well as aging demographics that will slow accumulations of assets and move toward decumulation. And that doesn’t even take into account the growing power and fewer number of brokerage companies and other distributors—as well as growing consumer awareness of and demand for lower fees.

Just like financial advisers who focus on the high-net-worth and ultra-high-net worth markets, investment firms should turn their attention to higher-revenue products, geographies and segments, kasina suggests. Only truly “differentiated products with believable alpha stories” can sustain higher fees, the firm says.

Along with this, firms need to reassess their competitive advantages, and continue to cut their operational costs through automation and paperless initiatives.

Since the U.S. market is maturing, asset managers need to return to the drawing table on less-mature markets in other parts of the world. They should also consider acquisitions and organic growth of core funds.