BOSTON-A disillusioned Generation Y. The emergence of large middle classes in emerging nations. New forms of communicating with customers, including social networks.
These will provide opportunities for growth for the asset management industry, said Penny Alexander, senior vice president of Franklin Templeton Investments. Alexander made her remarks in her keynote address at the NICSA General Membership Meeting here earlier this month.
There's even a short-term opportunity. Alexander did not fail to underscore the need to get Baby Boomers to save and invest more for their imminent retirements, given the fact that the average 401(k) balance is a paltry $70,000.
"How are they going to stretch those 70 G's until they are 90 years old?" Alexander asked. "This is a tremendous opportunity for us to help people plan for retirement and their longevity."
Generation Y-those customers in their 20s and their 30s-has become more risk averse than their great-grandparents did in the aftermath of the Great Depression, when the market fell 87%, Alexander said. Historically, it is important to remember that since 1926, the market has delivered an average return of 9% a year, she noted.
"All is not lost," Alexander said. "Not all markets had a miserable decade in the 10 years ended 12/31/09. The Columbian stock market rose an average of 32.2% a year in the decade. Peru's rose 26.5%, Czechoslovakia's 25.9% and Brazil's 19.9%. These are the kinds of stories that we need to remind Generation Y about. Get them to look all over the world."
Perhaps more importantly, the asset management industry needs to adapt more readily to new technologies and ways to reach its customers-particularly this younger group.
Alexander, like many other speakers at the NICSA conference, paid homage to Steve Jobs, founder and former chairman of Apple, with the news of his untimely death at age 56 the morning of her keynote address. Alexander pointed out how Jobs' vision transformed the personal computing industry.
Likewise, Alexander and other speakers said, the asset management industry must embrace new technologies and find ways to differentiate individual firm brands.
Alexander gave a succinct example of the music industry. "Think of all the ways you have been able to listen to and purchase music," she suggested. "Vinyl records peaked in 1977 with 534 million units sold. Cassettes' heyday came in 1990, with 530 million units sold. CDs peaked in 1999 with 995 million units sold."
And digitized music, which has yet to reach its reach its apogee, had 1.2 billion downloads in 2009, she noted.
"Here's another example-how many years it took mass communication to reach 50 million users," Alexander said. "Radio took 38 years, television 13 years, the Internet four years, and the iPod three years. Facebook, which added 200 million users in one year, now has 750 million users.
"The evolution of new technology continues to compress, and the adoption time continues to compress," Alexander continued. "We are going to have to continue to innovate. We have to step up our efforts as an industry to reach out to those gun-shy Gen Y's."
Likewise, on a separate panel on distribution, Marty Willis, chief marketing officer of OppenheimerFunds, urged the asset management industry to take fresh approaches to sales, marketing, product development and customer service.
"The biggest challenge in our industry is sameness. There is not a lot of differentiation," Willis said, on the panel titled "Innovative Approaches to Effective Distribution-Post the Economic Crisis."
"Let's take a lesson from Steve Jobs. Before Jobs, personal computers were all the same," Willis said. "Yet he took a page out of a different book on computing and branded that company differently on every touch point-from product design, to the genius bars to the unique Apple storefronts."
Further, technology will not only change how fund companies interact with investors but also how their wholesalers can serve financial advisers, Willis predicted.
"Pharmaceutical companies use sophisticated database management modeling to identify who they are going after with what message," she said. "We are not there yet, but I think you will see a change in the next 10 years where new database technologies will allow wholesalers to move up in terms of the value they offer advisers."
Pioneer Investments is currently using new technologies to deliver market insights to advisers, noted Joseph D. Kringdon, president of Pioneer Funds Distributors and executive vice president/head of U.S. retail sales and marketing at Pioneer Investments, speaking on the same distribution panel.
"We are trying to build up intellectual capital and are using multiple ways to deliver content," Kringdon said. "We want to make sure our wholesalers are the best at what they do by providing them with a lot of good information that they can turn into knowledge, that over time, becomes wisdom."
In emerging markets, Alexander said the middle class is projected to grow from 3.3 billion consumers in 2006 to 5.1 billion by 2025.
True, Alexander admitted, these are households characterized as having earnings of a mere $6,000 annually. But put this opportunity in perspective, she suggested.
In terms of growth in assets under management, the forecasted growth for mutual fund assets over the next decade is projected to be twice the United States in Asia and three times in Latin America. Meanwhile, the U.S. and Japan may continue struggling with the aftermath of recessions for years to come, Alexander said.
If the U.S. mutual fund industry were to able to convince the 5.1 billion people defined as middle class in the emerging markets to contribute just $100 a month to its products, this would result in nearly $6 trillion in annual gross sales.
"OK. Perhaps with $6,000 a year in annual income that is too optimistic," bring that down. If it was only $20 a month, that would equal $782 billion in annual gross sales. Even if that is too optimistic, $10 a month would equal $391 billion in annual gross sales.
"This illustrates the opportunities we have before us," Alexander stressed. "As an industry, as a whole, if we are thoughtful and proactive-we can capture our share of the pie."
BOSTON-A disillusioned Generation Y. The emergence of large middle classes in emerging nations. New forms of communicating with customers, including social networks.
These will provide opportunities for growth for the asset management industry, said Penny Alexander, senior vice president of Franklin Templeton Investments. Alexander made her remarks in her keynote address at the NICSA General Membership Meeting here earlier this month.
There's even a short-term opportunity. Alexander did not fail to underscore the need to get Baby Boomers to save and invest more for their imminent retirements, given the fact that the average 401(k) balance is a paltry $70,000.
"How are they going to stretch those 70 G's until they are 90 years old?" Alexander asked. "This is a tremendous opportunity for us to help people plan for retirement and their longevity."
Generation Y-those customers in their 20s and their 30s-has become more risk averse than their great-grandparents did in the aftermath of the Great Depression, when the market fell 87%, Alexander said. Historically, it is important to remember that since 1926, the market has delivered an average return of 9% a year, she noted.
"All is not lost," Alexander said. "Not all markets had a miserable decade in the 10 years ended 12/31/09. The Columbian stock market rose an average of 32.2% a year in the decade. Peru's rose 26.5%, Czechoslovakia's 25.9% and Brazil's 19.9%. These are the kinds of stories that we need to remind Generation Y about. Get them to look all over the world."
Perhaps more importantly, the asset management industry needs to adapt more readily to new technologies and ways to reach its customers-particularly this younger group.
Homage to Jobs
Alexander, like many other speakers at the NICSA conference, paid homage to Steve Jobs, founder and former chairman of Apple, with the news of his untimely death at age 56 the morning of her keynote address. Alexander pointed out how Jobs' vision transformed the personal computing industry.
Likewise, Alexander and other speakers said, the asset management industry must embrace new technologies and find ways to differentiate individual firm brands.
Alexander gave a succinct example of the music industry. "Think of all the ways you have been able to listen to and purchase music," she suggested. "Vinyl records peaked in 1977 with 534 million units sold. Cassettes' heyday came in 1990, with 530 million units sold. CDs peaked in 1999 with 995 million units sold."
And digitized music, which has yet to reach its reach its apogee, had 1.2 billion downloads in 2009, she noted.
"Here's another example-how many years it took mass communication to reach 50 million users," Alexander said. "Radio took 38 years, television 13 years, the Internet four years, and the iPod three years. Facebook, which added 200 million users in one year, now has 750 million users.
"The evolution of new technology continues to compress, and the adoption time continues to compress," Alexander continued. "We are going to have to continue to innovate. We have to step up our efforts as an industry to reach out to those gun-shy Gen Y's."
Likewise, on a separate panel on distribution, Marty Willis, chief marketing officer of OppenheimerFunds, urged the asset management industry to take fresh approaches to sales, marketing, product development and customer service.
"The biggest challenge in our industry is sameness. There is not a lot of differentiation," Willis said, on the panel titled "Innovative Approaches to Effective Distribution-Post the Economic Crisis."
"Let's take a lesson from Steve Jobs. Before Jobs, personal computers were all the same," Willis said. "Yet he took a page out of a different book on computing and branded that company differently on every touch point-from product design, to the genius bars to the unique Apple storefronts."
Further, technology will not only change how fund companies interact with investors but also how their wholesalers can serve financial advisers, Willis predicted.
"Pharmaceutical companies use sophisticated database management modeling to identify who they are going after with what message," she said. "We are not there yet, but I think you will see a change in the next 10 years where new database technologies will allow wholesalers to move up in terms of the value they offer advisers."
Pioneer Investments is currently using new technologies to deliver market insights to advisers, noted Joseph D. Kringdon, president of Pioneer Funds Distributors and executive vice president/head of U.S. retail sales and marketing at Pioneer Investments, speaking on the same distribution panel.
"We are trying to build up intellectual capital and are using multiple ways to deliver content," Kringdon said. "We want to make sure our wholesalers are the best at what they do by providing them with a lot of good information that they can turn into knowledge, that over time, becomes wisdom."
Booming Emerging Markets
In emerging markets, Alexander said the middle class is projected to grow from 3.3 billion consumers in 2006 to 5.1 billion by 2025.
True, Alexander admitted, these are households characterized as having earnings of a mere $6,000 annually. But put this opportunity in perspective, she suggested.
In terms of growth in assets under management, the forecasted growth for mutual fund assets over the next decade is projected to be twice the United States in Asia and three times in Latin America. Meanwhile, the U.S. and Japan may continue struggling with the aftermath of recessions for years to come, Alexander said.
If the U.S. mutual fund industry were to able to convince the 5.1 billion people defined as middle class in the emerging markets to contribute just $100 a month to its products, this would result in nearly $6 trillion in annual gross sales.
"OK. Perhaps with $6,000 a year in annual income that is too optimistic," bring that down. If it was only $20 a month, that would equal $782 billion in annual gross sales, and $10 a month would equal $391 billion in annual gross sales.
"This illustrates the tremendous opportunities we have before us," Alexander told the audience. "As an industry, as a whole, if we are thoughtful and proactive-we can capture our share of the pie." MME
