By Emma Wallis, Insight & Content Strategist

The asset management industry is undergoing a leadership transition with a new cohort of CEOs taking over and more handovers expected. According to Casey Quirk, half (52%) of the largest 50 asset managers have “next generation” CEOs[1]. A further 22% of large managers could be considering succession planning as their CEOs, who are aged over 60[2], approach retirement.

 

The new guard of leaders will be called upon to reform their firms as they navigate multiple headwinds. Profit margins are being squeezed due to fee compression, escalating costs, regulation, consolidation and intense competition[3]. Artificial intelligence, big data and blockchain are beginning to shake up all aspects of the investment business. CEOs of mid-sized firms face the additional threat of being squeezed out by giant, global distributors on the one hand, and alpha-generating boutiques on the other. Invesco’s CEO Martin Flanagan went so far as to predict that a third of asset managers could go out of business over the next five years, amidst a wave of closures and consolidation.

 

To achieve profitable growth against this backdrop, leaders will need to cut underperforming business lines and identify which competitive advantages merit further investment. CEOs will require a new quiver of skills, according to Casey Quirk:

 

  • Creating new success metrics for strategic planning and incentives
  • Making clear, well-articulated choices that define the case for change
  • Allocating resources in budgets and in balance sheets
  • Modernizing the operating model across governance, brand, data and technology
  • Managing cultural evolution, especially as non-traditional talent recruitment rises[4]
  • Driving change with agile decision-making and project execution

 

“New CEOs may not have the experience of their more tenured peers, but they may be well positioned to reinvent their firms,” Casey Quirk wrote in a recent white paper, ‘Industrial Evolution: Securing Profitable Growth in Tomorrow’s Asset Management Industry’. “Most will be able to take more career risk, given that more of their total compensation not only lies ahead of them, but also depends on effectively navigating tomorrow’s more challenging operating environment. They can more closely align their success—and their incentives—with the large-scale nature of multi-year transformation.”

 

[1] “Next generation” CEOs have been in post for four years or fewer. Their average tenure is two years and their average age is 53.

[2] These CEOs have been in post for an average of 10 years.

[3] The U.S. Securities and Exchange Commission is planning to investigate this year whether barriers to small and mid-sized asset managers, as well as M&A activity, could curtail investors’ choice.

[4] Investment firms are introducing diversity and fresh ideas throughout the ranks. “Star asset managers and salespeople drove much of the industry’s early expansion, and were well compensated. Success in tomorrow’s industry will require equally rewarding new types of talent: marketing, technology, finance and human resources,” Casey Quirk observed.