The investment landscape in the UK is fundamentally different today than it was just a decade ago, and the way in which people approach investing has pivoted sharply away from the traditional methods. Many asset managers have acknowledged the seismic shifts reshaping the industry and have rushed to adapt.
Commentators such as Calastone’s head of global markets Edward Glyn warn that asset managers who fail to keep pace with the rate of change may be left behind. Their business models are being contested namely by rapid advances in technology, he claims.
Financial professionals have historically been the gatekeepers of all information regarding investment, and their clientele were beholden to them as a result. But now, even retail investors have an abundance of real-time data available to them and the ability to make instant changes to their portfolios.
Investors are more actively engaged in their portfolios due to this heightened access to information, and it is visible in the numbers. The average holding period of an equity fund was seven years in 2017, but that had almost halved to four years by 2024. Meanwhile, trading volumes are up a whopping 80% since 2018.
Asset managers must be cognisant of this if they want to retain their evolving client base, according to Glyn.
“When I bought my first fund, I had to sign it all off in paper, post it off, and wait six weeks until I found out I was an owner of units,” he says.
“Asset managers are now engaging with investors who are used to a purely digital proposition, and who want the same kind of financial services and advice proposition that is much more akin to the natively digital services we consume for other things, whether that’s streaming films or ordering clothes and food online.
“We now expect things to be personalised to our specific needs with instant payment, instant settlement and instant delivery – it’s the Amazon-ification of funds.
“It means people are much more engaged with their portfolios and don’t just stick with something forever like they used to. It’s easier now for them to go in and out of a fund or a sector than ever before.”
What the industry needs to realise is that it is dealing with a much better-informed investor than it interacted with in the past, Glyn adds. Without much information to draw upon themselves, people would remain invested in the vehicles suggested to them by the institutions that looked after their money. We are now witnessing this exodus as people realise they can invest beyond these default portfolios – and often make better returns as a result.
Glyn says: “The bank-owned asset management firms have performed very badly because they have preyed on the trust of their captive client base. You can see that from the amount of accounts that have switched to online banks such as Monzo and Revolut. We are seeing a massive difference between those who are investing for the future and those who will cease to exist.”
Read the rest of this article in the April issue of Portfolio Adviser magazine