5 Business Imperatives for Successful Wealth Management Firms
November 21, 2011 11:13 AM
5 Business Imperatives for Successful Wealth Management Firms
Asset management firms recorded average profitability of 28% through 2010 and the first half of 2011, according to a new McKinsey report, and independent asset managers will control two-thirds of all assets under management by 2015.
Here are five business imperatives successful wealth management firms will need to heed over the next three years:
Here are five business imperatives successful wealth management firms will need to heed over the next three years:
1. Ensure profitability can withstand continued pricing, cost pressure and volatility.
What steps should we take in 2012 beyond standard cost reduction (e.g., 10% reductions, hiring freezes) to address the industrys structural profitability issues? How do we prepare for another major market decline? Continued price erosion?
Have we improved our true productivity (especially in fast growth areas like ops and IT) and taken steps to ensure annual productivity gains?
Do we capture the benefits of scale or spend them on complexity? How can we reduce duplication, complexity and waste (especially outside the investment platform)?
Have we improved our true productivity (especially in fast growth areas like ops and IT) and taken steps to ensure annual productivity gains?
Do we capture the benefits of scale or spend them on complexity? How can we reduce duplication, complexity and waste (especially outside the investment platform)?
2. Develop conviction about the growth opportunities that will account for a third of new profits by 2015.
Does a point of growth matter more (in terms of our overall multiple or valuation) than a point of margin? What are we optimizing to?
What is our view of the growth landscape for 2015?
Which two or three mega-growth areas will drive more than half of our growth (and a third of profits) over the next three to four years and how will this change the business mix?
How much of our budget (and leadership) is dedicated to growth in general and in particular to the mega-growth areas? Is this number proportionate to the opportunity and our firms ambition?
What initiatives will we cut to create financial capacity and leadership bandwidth to fuel our targeted growth ambitions?
What is our view of the growth landscape for 2015?
Which two or three mega-growth areas will drive more than half of our growth (and a third of profits) over the next three to four years and how will this change the business mix?
How much of our budget (and leadership) is dedicated to growth in general and in particular to the mega-growth areas? Is this number proportionate to the opportunity and our firms ambition?
What initiatives will we cut to create financial capacity and leadership bandwidth to fuel our targeted growth ambitions?
3. Shift investment emphasis toward solutions and outcomes.
What outcomes will be most important to our clients in 2015 (e.g., LDI, inflation solutions, target-income solutions, target risk) and where should we be leaders?
If we are leaders, how big a business do we think solutions will be in 2015?
How do we transition from a product-driven firm to a client- and solutions-driven firm? For example, is our investment platform organized and incented to deliver client outcomes (e.g., income) or product-focused investment alpha?
If we are leaders, how big a business do we think solutions will be in 2015?
How do we transition from a product-driven firm to a client- and solutions-driven firm? For example, is our investment platform organized and incented to deliver client outcomes (e.g., income) or product-focused investment alpha?
4. Bring investment-like discipline to sales and marketing.
Does our return on investment from sales and marketing account for revenues, asset persistency and true cost to originate sales? How can we improve returns, which have been roughly stagnant for the past decade?
How much sales alpha does our sales force deliver compared to what it should be delivering? Is our sales force focused on the largest opportunities
for sales alpha?
How can we tie our sales incentives more closely to our firms economics and true sales value-add? By 2015, what portion of retail sales incentives should be tied to gross sales?
How much sales alpha does our sales force deliver compared to what it should be delivering? Is our sales force focused on the largest opportunities
for sales alpha?
How can we tie our sales incentives more closely to our firms economics and true sales value-add? By 2015, what portion of retail sales incentives should be tied to gross sales?
5. Make decisions about a winning 2015 business model.
Which of the winning growth models for 2015 will we emulate? How do we avoid falling short of becoming a global multi-asset class firm and getting stuck in the middle?
For generalist firms, how do we avoid spreading ourselves too thin, playing in too many products, clients segments and geographies but winning in none?
Is our ownership structure optimal? Are we deriving enough value from our financial institution parent (e.g., distribution, protection products)? What are the risks (e.g., compensation) from parent company regulation?
For generalist firms, how do we avoid spreading ourselves too thin, playing in too many products, clients segments and geographies but winning in none?
Is our ownership structure optimal? Are we deriving enough value from our financial institution parent (e.g., distribution, protection products)? What are the risks (e.g., compensation) from parent company regulation?
