As asset management CEOs pass the baton to their successors, will the new guard of leaders transform the industry? Are investment firms bringing in leaders with new skill sets and mindsets?
Asset managers have been switching CEOs at an unprecedented rate, a sign that the investment sector itself is at a turning point.
Last year alone saw new CEOs installed at Aegon Asset Management, Allianz Global Investors, AXA Investment Managers, BMO Global Asset Management, Fidelity Investments, GAM, HSBC Asset Management, J.P. Morgan Asset Management, JO Hambro Capital Management, Jupiter Fund Management, Legal & General Investment Management, M&G Investments, Martin Currie, Wells Fargo Asset Management and several smaller firms. Looking further back, in Q4 2018 the CEO role changed hands at DWS Group, Fidelity International and Macquarie Asset Management.
In the first quarter of this year, chief executives are taking the helm at Architas, Franklin Templeton, Nuveen and Waverton Investment Management. FTfm recently predicted that more CEOs will move on this year.
A confluence of factors are driving the turnover: M&A activity and consolidation; a shift from dual CEOs to a single head; generational change as CEOs retire and formulate succession plans; stakeholder dissatisfaction in some cases; and appointments creating their own momentum given that departing CEOs (some of whom moved to competitors) and interim leaders need to replaced.
So where are the new chiefs coming from? Are firms looking outside for new ideas or promoting their own people?
Looking at a snapshot of 31 new CEOs or Co-CEOs appointed in 2019 and 2020, appointments were evenly split between internal promotions (15) and external hires (16).
A third (29%) of the new chieftains held group or regional CEO roles at other firms, so the industry as a whole is not undergoing so dramatic a leadership transformation as it might first appear. It’s a case of more musical chairs, rather than a changing of the guard.
Six people (19%) held investment roles, which is to be expected given that investment is the beating heart of asset management.
The number of leaders who rose up through the distribution channel (seven people or 23%) is a bell-weather for its crucial importance. Success in the investment industry no longer hinges solely upon alpha generation, but also upon harnessing distribution channels, leveraging scale, entering new markets (Asia in particular), beta replication, ruthless cost control – and, above all, the ability to deliver what clients want and need, such as bespoke solutions and sustainable investments.
The remaining appointments draw from across the C-suite. Two of the new CEOs were promoted from the COO seat and one from CRO. Another was a CFO elsewhere. One executive was a Deputy CEO and two people were Co-CEOs who last year assumed sole responsibility. Two additional people have broad leadership experience across a variety of functions.
The next generation of leaders face gargantuan challenges. Multi-year trends such as digital innovation, climate change and the rise of China are disrupting the investment industry. Profit margins are shrinking due to fee pressure and competition from passive management. Costs are rising as investment in technology becomes imperative and regulatory scrutiny intensifies. Consolidation continues as businesses meld together to enhance their distribution muscle and achieve cost synergies, yet M&A activity creates its own challenges, not least retaining clients and employees.
Turnover creates an opportunity for soul-searching and to set a new direction. We may yet look back on 2019 as a turning point for the investment industry.
by Emma Wallis, Insight & Content Strategist