Asset management firms may be riding a rising tide of wealth in many countries, but the business is less stable than it appears. The easy money boom that began in 2012 masked deeper trends: Customers generally have become more cost-conscious and less trusting of actively managed products, while market regulations have called for greater transparency and stricter rules on inducements to push product sales. As a result, profits have been squeezed, and Bain & Company projects a sharp decline in profits per asset under management, at a negative 7% combined annual growth rate through 2022. Weaker firms will find it harder to realize their desired price point or to keep a lid on costs; stronger firms, meanwhile, will seize a growing share of the market and the profit pool.
Matthias Memminger and Mike Kuehnel are partners and Cyrosch Kalateh is a manager with Bain & Company’s Financial Services practice. Memminger and Kuehnel are based in Frankfurt, and Kalateh in Düsseldorf.
Whether through scale or niche, asset management firms must avoid the collapse of the middle.