This year’s NICSA SLF was a great opportunity to meet with clients, and prospective clients in a setting that promoted some great discussion around relevant and timely topics in the asset management industry. Traditionally NICSA has been known as a TA and operations industry group. Under the leadership of Jim Fitzpatrick, NICSA has been undergoing a rebranding, without rebranding. As was evidenced by the agenda, topics, and speakers this year and in the last few years, NICSA is beginning to attract new member firms that see the value and benefit from its renewed shift in focus to more or a product and distribution based focus.
Two key themes that seem to always produce a lively discussion are active vs. passive and human advisors vs. robo advisors. The active vs. passive debate has evolved from the initial fear of passive taking away market share for the actively managed funds to an acceptance of passive investing. This is coupled with the knowledge and recognition that investors will still seek actively managed investments. The overall consensus seemed to be that passive investing is very beneficial during times of up markets, such as the bull run over the last 10 years. However, the experts on the panel warned of the negative results during down markets. The examples cited were that passive investments will be subject to negative runs during a downturn, but actively managed investments may better shield their investors and absorb some of the losses during extreme downturns in the market. Whether the products are actively or passively managed, the panel agreed that consolidation will continue among asset management firms as they continue to seek ways to combat against decreasing margins and fee compression.
The human advisor vs. the robo advisor discussion revolved around demographics. Generally speaking, millennials prefer the robo advisor option while the boomers will continue to stick with their human advisors and it’s a mixed bag for X and Y generations. With cost at the forefront of the discussion, it’s easy for those with not a lot of investable income to choose a robo advisor, but trends have been seen that as the person advances in their career, they tend to want the human interaction and will migrate away from the robo advisor. With multiple demographics being served, it makes sense for some of these large advisory firms to offer both the robo and human advisor options.
Technology and a consumer seeking lower costs will continue to be a disruptor in the asset management space. Thus, the asset management firms will continue to look for ways to introduce technology to provide them with efficiencies that will ultimately result in increasing their AUM.