Brokers & Asset Management
Sector trends & challenges
Increased saving rates
In aggregate, household savings rates have increased markedly during the COVID-19 pandemic, as well as investing increasing in popularity amongst younger individuals. This has provided the sector opportunities to generate returns.
Wider economic pressures
The sector is vulnerable to macroeconomic stress, with risk of outflows or poorly performing funds. The likes of Robinhood and others show the potential for disruption, but equally the risks associated with new business models.
Passive investment growth
There is a gradual shift from actively managed to passive investment funds, which removes costs but places greater focus on price and technological innovation.
Sector rating profile
The sector is currently under less stress than it has been for several years, as COVID-19 has resulted in renewed interest in savings and investment products to consumers.
Brokers & Asset Management
The sector has performed relatively well during the COVID-19 period. Many households have increased savings rates during lockdown and, in an ultra-low interest rate environment, many consumer investment products have attracted strong demand, particularly with the recent recovery in stock markets.
However, there are a number of challenges, both in the near-term and further out into the future:
Rise of passive investing. There has been significant growth in the popularity of passive investing – often appearing to offer similar returns to investors as active fund management whilst reducing operating costs. In this more commoditised environment, fees and innovative features are of growing influence for consumers.
Continued downward pressure on fees. Businesses that are not able to cut their cost base and transition smoothly to new technologies will struggle as new fintech players continue the downward pressure on fees.
Regulator scrutiny. Regulatory bodies continue to scrutinise the operating practices and funding requirements of operators.
“Fad” investing. New investment types, such as cryptocurrencies, and the GameStop events, continue to attract significant media attention. Whilst some of these appear to be here to stay, operators looking into this space need to carefully evaluate the significant risks.
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Ed Boyle and Nick Smith are joint Sector Leaders at Interpath for FS overall, supported by an experienced senior team. This team tracks four key sub-sectors including the Brokers & Asset Management segment. As part of the FS expert team Rob Spence leads our approach to Brokers & Asset Management nationally.Our senior team
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