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Overview

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 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 Institute 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 Institute members expect to see the greatest change, as 72% say the influence of technology and data on decision-making at investment firms will grow significantly.

This research takes a structured approach to analyzing the future by:

Leveraging Scenarios that will have fundamental influences on how the investment industry evolves.

Describing Narratives that will shape individual investment firms’ futures through their various functions.

Identifying Investment Firm Shifts that individual firms can use as a guide to accomplish their respective goals.

Identifying Industry Shifts that the investment industry may need to accomplish collective goals.