One size doesn’t fit all

Murray Bender: RBC Investor & Treasury Services is pleased to present insights on the future of asset services. Featured on today’s podcast is Barney Nelson, CEO of Toronto-based consultancy, The Value Exchange, discussing the results of the 2023 Asset & Wealth Management Survey conducted by RBC Investor & Treasury Services in partnership with Ignites Research. Welcome, Barney.

Barney Nelson: Thanks, Murray. Great to be here.

Murray Bender: Barney, you’ve had an opportunity to review the results of the online survey, including the perspectives of some 250 asset and wealth managers across the globe. What surprised you most about the survey results?

Barney Nelson: I think for me there’s much in where the market is going that was kind of anticipated. So the return of fixed income, for example, the demise of cryptocurrencies as the mainstay of the portfolio, I think we could see coming.

But for me, what really stands out this year is first, the challenges that we’re seeing in the private asset space and private equity space—question marks about how much more runway there is for that asset class as part of the portfolio. Big questions about basically whether or not we’re missing out on performance opportunities in areas like FX execution, cash sweeping, and sec lending.

But I think for me, what really stands out is actually the operating model and the fact that, very consistently across all chunks of the market, we’re seeing an operating model emerge where there’s a great preference to do many things on your own, but ultimately, to rely on third parties for your core heart of your infrastructure, which is your book of record, your IBOR, and your client reporting. So there’s an increasing kind of clarity of borderlines there that I think really stands out for asset and wealth managers.

Murray Bender: What major differences did you see between what asset managers had to say and what wealth managers had to say?

Barney Nelson: Yeah. I think for me, what really stands out is the operating model that supports both. I think in terms of—essentially the asset managers’ operating model is very emerging, focused on kind of inside versus outside.

I think on the wealth side, what really, really stands out is who the investor is at the end of the chain and, ultimately, who the advisor is speaking to them. So for me, the predominance of the advisor is the central target of wealth management operational change really stands out as a kind of core theme that it’s all about making the advisor’s life smoother, simpler, more efficient than necessarily the end investor.

Murray Bender: This was a global survey. What are some of the main regional differences in the survey responses?

Barney Nelson: Probably the strongest regional difference is just simply ESG in Europe. You know, vast, vast amounts of bandwidth, focus and attention being paid on ESG, and all of the associated trickle-down effects of that in terms of not just compliance, but also how that manifests in client reporting, in portfolios, even in product selection and the balance between actively-managed fund structures and ETFs, for example. So I think, Europe is unique in that aspect.

And by comparison, I think it was very interesting to see how by equivalent, the US is just really warming up on ESG, I would say. And actually, I was surprised by how indifferent Canadians are to ESG as a general theme outside of the kind of top end of the institutional space. So for me, that’s a core area.

And the other area I mentioned earlier on about portfolio uptick and portfolio kind of optimization, widely differing views. Again, Europe very, very strongly actually in favour of—more strongly in favour of securities lending, FX and cash sweeping, whereas I think the US and then by Canada, interest in all of those solutions really seems to fall away.

Murray Bender: Interesting. When you consider the overall survey results, what would you say is the key insight or takeaway for managers?

Barney Nelson: Yeah, I think for me, what really stands out is, not surprisingly, it matters significantly who you are and where you are in the industry. So, there is no one target portfolio mix, nor is there any single operating model that supports everyone.

So if you’re an institutional manager, as I said, you’re looking to gain scale, basically do a lot of housekeeping to get your operating model into kind of shape, probably with a strong legacy background.

If you’re a wealth manager, it’s all about the advisor, as I said. But even the portfolio mix is going to be different depending on who you are.

So I think for me, the value of research like this is to be able to actually unpick all of the different profiles and really go into the granular detail, so that we move away from the idea that there is a single industry operating model.

Murray Bender: Thanks for some very, very interesting insights, Barney. We really appreciate your time today.

Barney Nelson: Thank you.

Murray Bender: For additional insights on topics relevant to corporate investors, including our previous podcasts, visit I’m Murray Bender. Thanks for listening.

This content is provided for general information and does not constitute financial, tax, legal, or accounting advice and should not be relied upon in that regard. Neither RBC Investor & Treasury Services nor its affiliates accepts any liability for loss or damage arising from use of the information in this podcast.