The future of asset management industry

Read an article on the future of asset managment industry, and some thoughts below:

The inevitable decline, but never demise, of stock-picking. With the prevalence of passive investment (indexing), the importance of stock-picking will definitely fades. Nevertheless, it’s a game with so much charisma (not less because of the legendary stories of Warren Buffet and the likes) that it will not die a complete death in the foreseeable future.

The increasing importance of macro savviness – to pick the right indexes (e.g. from regional perspective) for passive portfolio construction.

Increased advisory roles and provision of customized, total solutions to enhance competitiveness. Attention shifted from pursuing yields to making clients’ lives easier.

The fundamental shift of the industry’s underpinning emphasis. From a superior investment returns mindset to a service mindset. From trying to achieve the highest returns in industry to trying to help the clients achieve their goals most effectively. From “come invest with us because of the superior results we have been producing” to “let us serve you by helping you manage risk and enhance returns using our expertise, based on your specific needs“.

More transparency, more client education. Instead of profitting from information/expertise asymmetry, which serves as the cornerstone of all sorts of businesses for centuries, we may see a new breed of firms that thrive on educating and empowering clients with their expertise (once secret recipes that are not to be shared with outsiders). I look forward to seeing the equivalent of IDEO in the financial services industry.

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