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CFA Institute Report Dissects “Investment Firm of the Future”

The CFA Institute recently published a report on its survey of member views on what the future asset management firm will look like. 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. According to the report, industry change could go in a couple of directions, described as “adaptive change” or “destructive change”: Firms could adapt to the changes and disruptions, create new business models, and curb the growth of new organizations. Or on the “destructive change” side, newer firms with new business models could destroy existing organizations. The next five to ten years “represents an important time horizon for individual firms to better face realities, manage risks, and help craft alternative pathways,” the report said.  The report analyzed firms through five models: Business Model, Distributing Model, People Model, Investment Model, and Operating Model, which is the area the CFA Institute’s 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. With respect to people, the CFA Institute found that current industry composition (sized roughly by headcount) is 50% asset management, 5% asset owners, 15% private wealth, and 30% support firms and organizations. Among survey respondents, Asia is the only region where a majority (56%) expect continued growth in the number of investment professionals.