Deloitte consultancy subsidiary Casey Quirk has outlined four key trends set to transform the asset management world in 2017, including a deceleration in organic growth and distribution consolidation, that are leading to an acceleration in M&A activity.
4. Shifting value chain
In order to satisfy changing client demands and face head-on the growing industry pressures, investment managers will also begin to target more "holistic solutions", the report said, outlining four potential deal types it believes will be characterised by this approach.
Firstly, wealth managers and insurers will "combine forces" to blend insurance and asset management products in portfolios built around providing steadier sources of income and cashflow.
Secondly, asset managers will more actively seek wealth managers to integrate better portfolio allocation skills into more direct relationships with customers.
Thirdly, asset managers and intermediaries will begin acquiring "robo-advice technology", benefitting them through direct distribution capabilities and efficiencies in servicing small accounts.
Finally, defined contribution record-keepers will change hands often as both intermediaries and asset managers explore tapping a growing pool of assets in the space, particularly if policy "begins to enforce regulations discouraging rollover".
The report recommends asset managers looking to embrace M&A in 2017 will need to develop a clear strategic vision to identify opportunities.
"Success will require not only a strong emphasis on strategy, but also on transaction services," it said.
"It will be critical for buyers to accurately price expected growth and risk, particularly regarding cost savings.
"Financial and commercial due diligence is essential, along with well-planned post-merger integration, with an eye toward securing competitive advantage."