Canadian asset managers see the pressure for lower fees as the biggest challenge facing the industry, but cite compliance costs as the biggest issue for their own firms, according to research from KPMG LLP.
In a new report, KPMG detailed the results of its latest survey of the Canadian asset management industry, which found that industry executives are generally neutral on the industry’s outlook (83%), with the optimists (12%) outweighing the pessimists (5%) — although that proportion has shifted slightly to the gloomier side (in last year’s survey, 0% identified as pessimistic).
The top challenges facing the industry, the research found, is the pressure for lower management fees, which was cited as a top risk by 60% of respondents, followed by regulation at 52% and margin pressure at 50%.
Yet, when it comes to challenges facing their own firms, executives cited regulation most frequently (64%), followed by cybersecurity risks (48%) and margin pressure (45%). Pressure to lower fees ranked fourth at 43%.
Respondents also had differing views on the best opportunities for their own firms and for the industry as a whole.
According to the report, using technology to improve operations was seen as the top opportunity for respondents’ own firms, followed by gaining new investors and growing assets with existing investors.
Yet, for the industry overall, the use of data analytics to enhance the design and marketing of products was cited as the top opportunity, along with using technology to improve operations and enhancing returns with new investment strategies.
The report suggested that the Canadian asset management industry has been slow to make greater use of data, amid concerns about both cybersecurity and regulatory risks. However, the report also said that firms would increasingly have to use data to survive intensifying competitive threats.
“In an era of digital revolutions, crowded markets, and regulation creep, now is not the time for complacency,” James Loewen, partner and national sector lead for asset management with KPMG in Canada, said in a statement.
“If you’re a retail fund manager, it’s getting harder to compete, so you have to innovate either your product lineup or technology to be able to survive,” he said.