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Navigating Asset Management’s Changing Landscape

Our deep sector expertise, understanding of the nuances of industry challenges and trends, and our privileged networks as a wealth management executive search firm — these traits ensure you secure leaders who don’t just navigate change but harness it for competitive advantage. We use a extensive executive search process to identify executives like portfolio managers and chief investment officers whose strategic vision aligns perfectly with your firm’s ambitions, connecting you with talent that drives sustainable growth.

Asset management faces unprecedented transformation. Hanover will help you navigate these changes by finding an effective executive for your company. These executives are poised to guide your company through challenges and trends.

Regulatory Evolution

Asset management faces complex regulatory requirements, such as routine audits, T+2 and T+1 reporting, and Financial Conduct Authority (FCA) regulations. While these requirements pose a challenge for many financial operations, understanding and adapting to regulatory changes is crucial for protecting the company. Missed deadlines and reporting errors can lead to hefty fines and reputational damage.

Technological Disruption

As modern asset management evolves and has increasing demands, legacy systems have more difficulty keeping up. Aging equipment can create many issues, from inaccurate reports to costly process errors. Shifting from outdated IT infrastructure to modern solutions like cloud platforms can be a challenge due to data transfer and integrity concerns.

Shift to Alternative Investments

Investors are increasingly choosing alternative investments to diversify their portfolios, such as real estate, hedge funds, private equity and infrastructure. These nontraditional investments provide opportunities to receive higher returns and insulate their portfolios from market shocks in a turbulent economy. However, this shift to alternative investments presents challenges for asset managers in:

• Operational complexity: The asset management industry has a lack of consistency and standardization in reporting formats and schedules, making it difficult to track investments in real time and compare investments.
• Whole portfolio integration: Asset management faces increasing demands for personalized services, which require data collection and analysis tools to understand client needs.
• Data management and transparency: Alternative investments rely on internal valuations, which can be inconsistent or biased. Without audit or review, discrepancies in reporting can compound.

Environmental, Social and Governance (ESG) Integration

ESG principles have become more prevalent in investment strategies, as investors want their portfolio to align with their personal values. This trend means asset managers need to incorporate ESG criteria into their investment strategies. This objective presents challenges to asset managers due to the:

• Lack of uniformity: The ESG landscape is complex and nuanced, making it difficult for asset managers to compare ESG performance across companies and sectors.
• Dynamic changes: Scientific developments, regulatory bodies and societal expectations make ESG factors change often, requiring asset managers to stay on top of trends and adjust their strategies.
• Nonfinancial information: While traditional investments are analyzed with financial data, ESG analysis uses nonfinancial information. This change can be challenging for asset managers.

Fee Compression

Asset managers are expected to deliver more value to clients while maintaining healthy profit margins. The result is fee compression — the trend of downward pressure on advisory fees. Fee compression is driven by factors like:

• Pricing fairness and transparency: Asset managers need to consider the price-value outcomes of investments, especially as regulations change and investors become more strategic.
• More passive management strategies: Investors are increasingly choosing low-cost ETF options and low-cost index funds.
• Stringent regulations: Industry regulations make transparent and fair pricing necessary.
• Increased competition: Reduced fees can retain existing investors and draw in new investors, both of which are critical for outpacing competitors.

Though fee compression is a disruptive challenge in wealth and asset management, it presents an opportunity for asset managers to grow and improve the company’s offerings.