Uncertainty and disruption in global financial services

Darren Burns 25.05.2018

Several topics are being debated and predictions are being made about what the future of the global financial services industry will look like.

Influential trends to look out for

At a time when uncertainty is rife across many sectors, socio-economic, technological and political disruption are reshaping the global financial services industry. Below I explore some of the key factors to consider for the future of financial services.

Greater consolidation & declining profit margins

Across the financial services, profits are decreasing. Advisory fees are getting pushed down and institutional investors have been seen to move their investment management in-house. Companies are looking to change things up by adjusting business models, hiring specialists, and integrating technology to their processes in an attempt to prepare for the future.

Major changes are happening and it is crucial to adapt accordingly, it is likely that consolidation will continue as business models are modified.

The continual rise of Fintech

Whilst technology has been changing many industries for some time, in the financial services its potential is beginning to be realised. It is expected that the world of asset management will open up to tech giants that possess Artificial Intelligence resources. There has been plenty of coverage stating that ‘robots’ will take human performed jobs, but in most circumstances this is just scaremongering - it is more likely to be the case that AI will work alongside and augment human intelligence.

Persistent passive investing

In 2017, passive funds accounted for roughly 20% of all fund investments. The increase of passive investment vehicles has caused a bit of a stir across global financial services, with many people seeing it as the end of active management. The other side of the argument in active management is that the increased market volatility can offer some of the best returns.

Asian financial markets seeing rapid growth

A serious amount of expansion in Asian assets under management is anticipated, with growth being significantly greater compared to any other regions. Unsurprisingly, a majority of the development will centre on China with the potential of the Chinese government opening the asset management industry to foreign investors. Any investment professionals who have Asia-focused experience could be in a strong position over the coming years.

Importance of social responsibility

It has been a talking point for several years, but its prominence is becoming much greater. Paying special attention to environmental, social and governance considerations could become an integrated part of the decision making process when it comes to investment. Improving diversity as a whole, and in particular the representation of women in senior positions within investment will be a prominent challenge for the industry.

Trust, credibility and principled investment

Prosperous investment professionals are often seen in a negative light because they do well regardless of whether the client sinks or swims. With recent high-profile scandals that have ruined reputations, the industry is finally starting to realise that investors need to be put first.

Demand is going to grow for financial services professionals with specialisations, encompassing financial analysis for specific sectors, countries and even regions. Those that have the ability to recognise and exploit gaps in the market, developing the appropriate skills to fill them will be critical.

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