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Increased regulation is overwhelmingly the top concern among European (including UK) fund and asset managers, as the European Union and a post-Brexit Britain have introduced a raft of new regulatory reviews and amendments. Royal Bank of Canada Investor & Treasury Services’ inaugural global asset and wealth manager survey, expanding the previous Canadian survey, today reveals that more than three quarters (77%) of European managers cited it as their top concern, with “increased client expectations” in a distant second place (40%) and “technological change” in the third spot (25%).
While the COVID-19 pandemic initially slowed the introduction of new regulation across Europe, the EU has subsequently adopted an ambitious range of new measures including the Alternative Investment Fund Managers Directive (AIFMD), the Markets in Financial Instruments Directive (MiFID) and Solvency II. In the UK, meanwhile, Brexit has necessitated the amendment or republication of most financial sector regulation, raising uncertainty about how this will impact the business environment.
But the survey of 112 managers conducted by RBC I&TS revealed regional discrepancies in managers’ top-of-mind challenges, perhaps because of differing impacts from Covid-19. Less than a third of Canadian managers (30%) expressed concern about regulation, instead focusing on a broader range of key challenges, including “returning to the workplace” at the top (43%), followed by technological change (37%), “market volatility” (35%) and “cyber/privacy issues” (33%). Managers in Asia, meanwhile, ranked “increased client expectations” at the top (71%), followed by “talent management” (57%) and increased regulation (43%).
Regional differences were also apparent in managers’ appetite for environmental, social and governance (ESG) investing, with European managers putting more emphasis on it than their Canadian and Asian counterparts. However, the report said that this could change as interest in ESG investing gains traction at a time of cultural shifts leading to increased focus on racial equality and climate change.
The survey also showed that digitization of manual processes is the key technology investment priority regardless of region (61% of managers said it was their main focus), having been accelerated as a result of the pandemic and holding significant opportunity around the use of advanced technology such as AI to leverage the growing banks of data.
Other key findings in the survey include:
- 79% of managers said improving efficiency was their top priority
- Scalability is the top driver (cited by 51%) in choosing to outsource their middle office functions
- Net investor demand for alternatives and exchange-traded funds is top among various asset types, regardless of location, with cash and fixed income at the bottom
- Two-thirds of managers predict that demand for active investments will increase in the coming year, while 36% expect a decline in demand for passive strategies during this time
Richard Street, Global Head, Client Coverage at RBC I&TS, said, “While the timing of Covid-19 outbreaks varied from region to region, few countries – if any – escaped the severity of the pandemic. These timing differences, combined with heightened regulatory activity in the UK and Europe, appear to have contributed to regional discrepancies in managers’ top-of-mind challenges. Our inaugural global survey shows that while these are challenging times, asset and wealth managers are adapting quickly to the ‘brave new world’ in their pursuit of continued growth and resilience, whether it’s through digitization of manual processes, investing in alternatives or outsourcing their middle office functions.”
