Asset management outlook: Thriving through uncertainty in 2024

By Ronald S. Niemaszyk, Principal – Wealth & Asset Management Industry Practice at Wipfli.

It may seem counterintuitive, yet economic uncertainty and market volatility set the stage for critical opportunities for asset management firms to shine in 2024. The stakes are higher now that the last bull market appears solidly in the rearview mirror. So, to stay in the game (and ahead of the competition), firms need to be extra careful and strategic with their prime resource allocations — for people and technology.

By the same token, investors benefit through extra assurances that their asset managers have the tools and the acumen to navigate effectively through this dodgy trading environment.

Improving efficiencies and mitigating risk in the asset management industry, whether it’s people management, data and analytics or regulatory compliance, will be core objectives for a strong and successful year ahead.

The right people and tech

New digital technologies are shaping how asset management is done, which ties directly into the industry’s critical staffing challenges. The high-performance computing needed to analyze vast amounts of trading data means that firms have no choice but to bring on and retain computer science talent at the highest level. Even with the growing role of AI and automation, the role of human talent to drive decision-making remains paramount. People can focus on using their highest-level skills and let the machines do some of the tasks that used to eat up their time. AI actually helps your people become more valuable than ever.

Teams need to be able to support trading decisions with highly sophisticated data and should expect to compete with tech companies to recruit the top candidates for data analysis roles. You may need to look differently at how you source and compensate your talent to remain competitive. Your search for candidates likely needs to go beyond new finance grads (though you need them, too) as you scour for people on the technology side with advanced skills who will help make the right decisions for you as quickly as possible.

Office culture

While the wealth management side of the business and other financial sectors have responded to employee expectations for hybrid or even fully remote work, the in-office culture in asset management seems firmly here to stay. Real-time knowledge-sharing and collaboration are highly valued and so the broad consensus is that with all the rapid transformation and need for immediate feedback, employees should be working together in the same physical space. An in-office workforce may help foster a culture of trust and confidence in each other’s capabilities.

Resource allocation

Most firms may be struggling with the best way to allocate resources to identify the tech products they need. They are significant investments, and the choices can be overwhelming. Many benefit from third-party assistance in technology planning. A road map that helps them define their current and future needs, determining the proper budget for those needs and a plan for expenditures can set firms up for a strong course for stability and growth, especially through periods of economic uncertainty. In fact, experimenting with various options with support from experienced advisors may be the only way to confirm your choices and keep from falling behind in this highly competitive sector.

Outsourcing some roles that are not integral to your technology core may make sense in your resource reassessment. An outsourced CFO or cybersecurity team may be a wise move so you can concentrate your in-house talent expenditures on your technology infrastructure and the people in the office who can help improve your trading acumen.

Similarly, supplementing your hiring with offshore hires in India or the Philippines, for example, may also be a smart move for firms struggling with budgeting and limited availability of local talent. Firms may need to exercise some flexibility in their in-house hiring priorities, as they can find excellent workers for certain support roles, particularly for data analysis, outside the U.S.

M&A impact

When considering the M&A landscape, the impact of increased valuations and interest rates is clearly a roadblock to large, transformational deals. However, firms are still eager to expand their offerings and knowledge with strategic acquisitions and partnerships. One of the factors driving more targeted M&A activity is the evolution of investment vehicles. While open-ended funds remain the dominant product in professionally managed assets, other options still attract attention and spur investments.

The products gaining popularity in the marketplace focus on serving the explicit needs of clients. Actively managed ETFs and direct indexing allow for greater tax efficiency and transparency. And theme-driven funds and portfolio construction allow for clients to focus on individual sectors, ideas or preferences, such as ESG, energy, infrastructure or other areas that align with their priorities.

Whether expanding offerings by acquisition or launching products in-house, each comes with its own series of challenges. Whether it’s integrating people and technology through an acquisition or developing the technology systems to support new product offerings, the path to success largely depends on asset management firms having a clearly defined road map and the resources to support their efforts.