Investment Firm of the Future

Investment firms face a future in which change is accelerating.

The urgency to adapt is unleashing considerable stress and disruption on individual firms and the industry as a whole.  There are two underlying types of accelerating and disorienting change: 1) adaptive change, in which existing organizations create new business models, adapt to disruptions, and curb the opportunities of new organizations, and 2) destructive change, in which new organizations with new business models destroy existing organizations. Among the CFA Institute members surveyed, 72% expect the pace of industry consolidation to speed up, and 55% believe the biggest challenge for financial performance will be fee or cost pressures.

Investment Firm of the Future  focuses on asset management and outlines what investment firms are likely to develop into, and what they could develop into with stronger intentional leadership. The current investment industry composition (sized roughly by headcount) is 50% asset management, 5% asset owners, 15% private wealth, and 30% support firms and organizations. Among CFA member survey respondents, Asia is the only region where a majority (56%) expect continued growth in the number of investment professionals. In terms of the composition of investment professionals, 53% say the business case for improved diversity in the industry is strong or very strong, but only 14% say the speed of uptake of diversity and inclusion practices will be fast.

We look out over 5–10 years, which represents an important time horizon for individual firms to better face realities, manage risks, and help craft alternative pathways. We unpack firms into five models by reference to their functional parts: Business Model, Operating Model, People Model, Investment Model, and Distribution Model. The Operating Model is where CFA members expect to see the greatest change, as 72% said the influence of technology and data on decision-making at investment firms will grow significantly.