Remarks and Discussion

U.S. Securities and Exchange Commission

Asset Management Advisory Committee

January 14, 2020

Ben Phillips, Principal, Deloitte Consulting LLP
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The strongest shifts seen in 40 years are transforming U.S. asset management

1 Demand 2 Supply 3 Impact

• Demographic 

changes

• Customized, 

outcome-oriented 

advice needs

• Consolidating 

intermediaries

• Fee sensitivity

• Lower organic 

growth

• Vendor 

oversupply

• New capital 

markets

• Passive 

investing

• Rising fixed 

costs

• Margin 

pressure

• Holistic advice as value proposition

• Less registered product

• Different pricing

• More direct-to-consumer sales

• More automation

• Investor data as a core asset

• Activism and social-impact investing

• More public-private portfolios

Changing buyers + maturing economics = transition from product to service industry
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Demand overview

Buyers are becoming younger, older, more outcome-oriented and fee-sensitive

Demographic 

changes

• Baby boomers shift from accumulation to income 1 • Debt-heavy, risk-averse millennials favor cash flow

Customized, 

outcome-oriented 

advice needs

• Investor emphasis on objectives, not only excess return

• Individuals seek advice across investment, tax, protection

• Focus on client experience, trust, personalization

2

Consolidating 

intermediaries

• Fiduciary risk, tech needs favor scale advice providers

• Exodus of advice talent spurs consolidation

• New professional buying dynamics emerging industrywide

3

Fee sensitivity • QE’s smaller risk-free rates highlight management fees

• Fee budgets favor providing income rather than return 4

Lower organic 

growth

• Retirement funds in decumulation mode

• Fewer new asset pools to tap for professional management

• Without new money, asset managers must compete to grow

5

Additional data

5

6

7

8, 15

8
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Supply overview

Tighter client opportunities are fueling more rivalry among asset managers

Oversupply • Investment quality accrues to subset of providers 1 • Only a minority of asset managers are growing organically

Changing capital 

markets

• Fewer publicly traded companies frustrates stockpickers 2 • Private markets perceived as higher-yield in low-rate world

Passive 

investing

• Outcome-oriented advisors emphasize allocation skills

• Fee pressure favors exposures, not stock selection 3

Rising fixed 

costs

• Tech for customization, client experience boosts expenses

• Poor leverage across wide range of subscale business lines 4

Pressure on 

profits

• Lower growth, higher cost pressuring margin

• Widening range between winners and losers 5

Additional data

9,10

11

12

13

14
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Impact overview

Combined, demand & supply catalysts are reshaping U.S. asset management

Advice as the 

value proposition

• Asset managers extend intellectual property beyond portfolios

• More focus on additional tools, services, models and overlays 1

Less registered 

product

• Customization demands, tax concerns disadvantage pooled funds

• Distributed-ledger technology aids customization initiatives 2

Different pricing 

methods

• Outcome-oriented advisors emphasize allocation skills

• Fee pressure favors exposures, not stock selection 3

More direct-toconsumer distribution

• Seeking more client data, access, asset managers offer advice

• Technology blurs lines between asset and wealth managers

4

15

16

17

18

More automation • Cost concerns, alternative data mechanize some investments

• Advice provision relies more on AI and algorithms 5

Focus on data 

accumulation

• Client data plays a strategic role in shaping advice offers 6 • Increasing use of economic models trading data for advice

More listed-unlisted 

investing

• Wider individual investor exposure to private equity

• Innovations around liquidity and unitization fuel usage 7

Activism and socialimpact investing

• Active investors seeking differentiation wield more voting power

• ESG demand from younger investors reshapes investment processes 8

19

19

20

21

Additional data
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Notes: Millennials (born between 1982-2002), Generation X (1961-81), Baby Boomers (before 1960), Boomers + (before 1960, net worth > U.S.$250K); 

Retirees are age 65+

Sources: Deloitte Center for Financial Services, Investment Company Institute, Vanguard (“How America Saves”)

Additional data: Demand

Demographic changes

33%

9%

16%

14%

31%

50% 45%

4%

2015 2030

Baby Boomers

Gen X

Millennials

Boomers+

Wealth in the U.S.

by Generational Cohort

2025E

69%

56%

Retirees

31%

2015

44%

Pre-Retirees

$13.9T

$23.9T

U.S. Defined Contribution/IRA Assets

by Generational Cohort
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Fragmented advice oriented 

around 

standard products 

Outcome-Oriented Advice Holistic Financial Services 

Offering

Customized Individual 

Advice

Less variable outcomes 

against personal goals

Individualized attention 

delivered as a service

Advice across investments, 

protection, liquidity

More variable performance 

against benchmarks

Standardized advice 

delivered around products

73% of investors believe 

that achieving outcomes 

is the most important 

factor

Sources: Casey Quirk 2017 MMI Study, Yale School of Management International Center for Finance Stock Market Confidence Indices, Statista Client Demands

Additional data: Demand

Customized, outcome-oriented advice needs

81% of investors who 

prefer holistic financial 

advice that considers all 

stages of life

43% of retail investors 

believe their advisors 

effectively protect their 

portfolios from losses

Current Service 

Model

72% of financial advisors 

plan to increase their 

focus on financial 

outcomes 

52% of advisors believe 

holistic financial planning 

is the most important 

outcome for investors 

Advisors only spend an 

average of 3 hours on a 

customized portfolio per 

year

1 2 3

U.S. Individual Investor Preferences
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Number of U.S. 

Advisor Investment Decisionmakers

Source: Casey Quirk Advisor Database, Casey Quirk Global Demand Model, Cerulli

Additional data: Demand

Consolidating intermediaries

27%

12%

27%

11%

11%

9%

3%

$3.1T

-$1.0T

-$0.9T

2018 U.S. AUM

Active, By Channel, %

Private Bank

Subadvisory

Brokerage Home Office

Professional 

Buyers 

Legacy 

Retail

Legacy 

Institutional

Outsourced CIO

Customized 401(k)

Influence of New Professional Buyers

2015

31K

Teaming

170K

Exiting 

22K

15K

Outsourcing

102K

2021

5 Year U.S. Net New Flows

Active, 2019-2023E, $T
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Sources: Casey Quirk/McLagan Performance Intelligence, Casey Quirk research

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

‘05 ‘07 ‘09 ‘11 ‘13 ‘15 ‘17 ‘18 2021E Financial Crisis 

-4.9%

-5.7%

-5.2%

-4.4%

-6.6%

By Asset Class

Active 

Fixed 

Income

Active 

Equity 

By Asset Class 

& Channel

Inst’l

Passive

Retail

2015 - 2017

Annualized

By Channel Passive

-6.5%

-4.5%

-8.0%

-2.7%

-3.1%

2017 – 2018 

Annualized

Additional data: Demand

Fee sensitivity and lower organic growth

Change in Global Effective Fees Global (ex-China) Industry Organic Growth

Net flows as % of AUM
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*Consistent outperformance defined as consecutive periods of 5-year trailing positive excess returns net of fees from 2014-2018

Sources: Morningstar, eVestment, Casey Quirk analysis

Additional data: Supply

Oversupply: quality

0% 10% 20% 30% 40% 50% 60% 70%

20.7%

0-25% 64.1%

75-100% 3.4%

25-50%

50-75% 7.6%

37%

41%

2009-2013 2014-2018 All Periods

55%

51%

67%

23%

Strategies AUM

Consistent

Outperformers

Asset Managers by % of AUM

in Consistently Outperforming* Strategies, 2018

Investment Strategies 

With Consistent Outperformance, 2009-18
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Number of Global Asset Managers 

> $20B AUM

% Global Asset Managers 

with Positive Net Inflows

2004 2006 2008 2010 2012 2014 2016 2018

0.0%

5.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

Sources: Strategic Insight, eVestment, Casey Quirk analysis

117

95

136

103

0

20

40

60

80

100

120

140

Equity Fixed Income

+16.2%

+8.4%

2015 2018

Additional data: Supply

Oversupply: competitors
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Additional data: Supply

Changing capital markets

2016 2017 2018 2019

4,500

5,500

7,500

0

6,500

3,671

`76 `86 2006

7,322

`96 2016

40

120

0

100

80

60

20

73K 79K 85K

100K

Number of Listed U.S. Companies

Number of U.S. Registered Investment Products in thousands

Sources: National Bureau of Economic Research Working Paper 21181 (Doidge et al.), Credit Suisse, Morningstar, eVestment
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Additional data: Supply

Passive investing

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

64%

4%

2% 1%1%

10%

5% 8%

17%

2007-2012 Flows

6%

2% 3% 1%

22%

57%

2013-2018 Flows

Unconstrained Fixed

Emerging Markets Debt Global Fixed Income

High Yield

Target-date/multi-asset

Smid Cap Equity

Developed Core/Core+

Large Cap Equity

Passive Net New Inflows Worldwide

$billions

Sources: Morningstar, eVestment
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Additional data: Supply

Rising fixed costs

31

% 37

%

45

%

46

%

5%

-5%

0%

10%

15%

’13-’14 ’14-’15 ’15-’16 ’16-’17 ’17-’18

C&B Non-C&B Revenue

31%

37%

45%

46%

36%

Year-over-Year Changes in Costs and Revenues: U.S. and European Asset Managers

Notes: C&B=compensation and benefits (variables costs). Source: Casey Quirk/McLagan Performance Intelligence
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Additional data: Supply

Pressure on profits

32%

35%

32%

30%

34%

32%

20%

30%

10%

15%

25%

40%

35%

45%

2013 2014 2015 2016 2017 2018

Operating Margins: U.S. and European Asset Managers

Sources: Casey Quirk/McLagan Performance Intelligence, Standard & Poor’s
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Additional data: Impact

Holistic advice as value proposition

Intermediary

Administrative

Asset 

Management

Advice

24%

28%

20%

21%

2013

32%

24%

28%

23%

2015

35%

23%

22%

21%

2021E

1.65%

1.47%

1.35% Expected Future Fee Shifts

Advisors look to maintain their economics, but will 

be challenged due to oversupply of inefficient 

advisors and lower yields

Technology and proprietary differentiators are 

critical to the intermediaries’ survival

Distribution and marketing will be significantly 

compressed by efficiency gains

Managers will need to have a strategic response to 

passive and cost conscious options

Investor Fee Budgets in % AUM

Notes: Administrative fees includes transfer Agent, administrative fees, and 12(b)-1

Sources: Casey Quirk Advisor Database, Casey Quirk Global Demand Model, Investment News, Casey Quirk Analysis
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Additional data: Impact

Less registered product

7%

2014

35%

Variable Annuities

29%

6%

10%

7%

Advisor-Sold DC

Mutual Funds

10%

31%

8%

30%

11%

14,984

7%

2018

Individual

Securities

ETFs

SMAs

13,075

4.4%

0.1%

15.8%

3.2%

-2.1%

7.4%

U.S. Advisor-Sold Investment Vehicles1

AUM in $billions

1Advisor-sold products only. Excludes alternative vehicles, insurance products, structured notes, REITs, 529 plans, commodities and other vehicles. 

Sources: Morningstar, ICI, Cerulli, Ignites Research, Casey Quirk Global Demand Model, Casey Quirk Defined Contribution Model, Casey Quirk Retail Demand Model, 

Casey Quirk analysis

CAGR
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Additional data: Impact

Different pricing methods

0%

1%

2%

3%

4%

5%

6%

7%

8%

2014 2015 2016 2017

75th

50th

25th

No Usage

Considering

Implemented

65%

18%

12%

Performance Fees as % of Net Revenues:

U.S. and European Asset Managers

U.S., European Asset Managers 

Using Performance Fees, 2018

Sources: Casey Quirk Performance Intelligence Survey, Casey Quirk 2018 Strategy Officer Study and Casey Quirk Analysis

Percentile key
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Additional data: Impact

More direct-to-consumer distribution

0

1

2

3

4

5

Digital 

Engagement

Personalized 

Advice

Capabilities 

Human 

Touchpoints

Level of Demand 

Real-Time 

Research

Millennials Generation X Baby Boomers Boomers +

U.S. Individual Investor Preferences

By demographic; 5 = highest preference

Notes: Millennials (born between 1982-2002), Generation X (1961-81), Baby Boomers (before 1960), Boomers + (before 1960, net worth > U.S.$250K)

Source: Deloitte Center for Financial Services
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Additional data: Impact

More automation and focus on data accumulation 

50%

13%

35%

38%

10%

29%

6%

21%

2018 2019

Data analytics are not an input

Data analytics are a primary input

Data analytics are a secondary input

Data analytics are minor input

69%

54%

54%

46%

46%

23% Retooling existing

skill sets

Change incentive

structures

Invest in technology

Hire additional

sales professionals

Refocus efforts on

high growth segments

Enhance

marketing organization

Role of Data Analytics in Distribution:

U.S., European Asset Managers, 2019

Most Important Goal for Organic Growth: 

U.S., European Asset Managers, 2019

Source: Casey Quirk Distribution Benchmarking
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Sources: Casey Quirk Global Demand Model

Additional data: Impact

More listed-unlisted investing

24%

16%

Private Market 28%

2019

13%

32%

7%

12%

13%

11%

16%

21%

7%

2024

Solutions

Hedge Funds

Equity

Fixed Income

Passive

$336

$404

$0.9T

$1.4T

$0.2T

$2.2T

-$2.0T

$2.4T

75%

$51B

19%

$13B

6%

$4B

-

Global Asset Management Revenues

2019-24E

Revenue, $B Net New Flow, $T Revenue Growth, $T
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Sources: Casey Quirk Distribution Benchmarking

Additional data: Impact

Activism and social-impact investing

8%

8%

8%

46%

8%

38%

23%

38%

54%

23%

15%

8%

31%

38%

54%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0%

Market Leading Competitive Adequate Lagging

Integration of ESG 

in investment 

process

Sales / investment 

team articulation 

of ESG integration

Firm’s articulation 

of ESG as part of 

brand / value 

proposition

Brand recognition 

as leading ESG 

provider

ESG Competitive Positioning

% of Participants, self-reported

Less Key ESG Initiatives

Differentiated

More 

Differentiated

ESG Investing Progress: U.S. and European Managers

2019
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