AMWatch

Aberdeen co-founder: Adapting to a changing world

COMMENTARY: Today, Aberdeen Asset Management and Standard Life are formally merging, creating a behemoth asset manager. Co-founder of Aberdeen, and new Co-CEO of Standard Life Aberdeen, Martin Gilbert, reflects on the rationale behind the merger.

Photo: PR

It’s a curious trait of society that we often simultaneously embrace, and are nervous of, technology.

Barely a day goes by without concerns being raised about how robotics is changing the world of work. We can see huge potential in artificial intelligence but its development is intricately bound up in fears about computers ultimately being our masters.

Meanwhile automated vehicles excite us as much as they spark fears of what a driverless car, let’s say, might actually do when left to its own devices.

This seemingly contradictory relationship is nothing new. Mechanisation of industry and agriculture across Europe in the 1800s brought fears that newly invented machines would destroy livelihoods by replacing humans.

The first steam locomotives led some to worry that the hitherto unheard of speeds achieved by the vehicles would turn people inside out. Not so long ago there was much concern that using mobile phones could damage our brains.

Many concerns seem unfounded

In hindsight, many concerns about technology seem unfounded. Change is inevitable and has to be embraced because progress is unstoppable. The asset management industry is going through huge changes at the moment. Individuals are having to take more responsibility for saving for their futures than their older peers ever had to.

Governments and companies are gradually stepping back from the responsibility of providing retirement provision. Individuals are having to fill the gap and they want to feel confident that they can, for instance, save a specific sum for their retirement. This is creating greater demand for multi asset and outcome orientated investment products.

Meanwhile various pension funds, insurers and financial institutions want to work with fewer investment companies from whom they buy a wider range of strategies. That means that large asset managers need to be able to offer the full suite of strategies to clients. Part of the success of the large US asset managers has been their ability to market multiple investment strategies to clients.

These two broad trends are seeing demand for the next generation of investment capabilities increase. The ability to offer client based solutions and, for example, incorporating smart beta and alternatives can complement traditional allocations to bonds, equities or property. The biggest global asset managers will need to provide both highly tailored products and a wider set of strategies to succeed. They will also need to be able to deliver their range of products and strategies on a global basis.

Asset management industry in two camps

This situation leaves the asset management industry polarising into two camps. On the one hand, boutiques can prosper by offering  a small number of truly quality products or strategies. On the other, there are the asset managers with the scale and breadth of expertise to offer a wide range of products that can be tailored to clients’ needs, wherever they are in the world.

The other big trend in the asset management industry is a three pronged scrutiny on costs. Part of the upshot of individuals being more responsible for their savings is that they are scrutinising the costs involved.

This scrutiny is being matched by institutional investors looking to reduce costs by working with fewer managers offering more products and strategies. The final prong of scrutiny is coming from regulators quite rightly pushing asset managers to provide transparency and tangible support for their fees. All the time, the inexorable rise of passive investing, with its generally lower costs, is pressuring active managers to justify their fees.

Merger acknowledges trends

Our own merger with Standard Life is driven by an acknowledgement of these trends. Together we will be able to achieve more than would be able to on our own. It will combine our respective strengths, and produce a full range of products and strategies that can be delivered to clients on a genuinely global platform.

This breadth and depth of investment capability will allow us to develop and deliver solutions for our client’s ever evolving range of needs. The enhanced diversity in our business will provide stable revenue streams that will allow us to invest in retaining and recruiting the best people, supported by systems that allow them to work to the best of their ability.

All of these trends can be seen either as challenges or opportunities and I prefer to view them as the latter. It strikes me that many of the fears about new technology, or what the future holds in general, are really concerns about the unknown. Some worries about the future are well founded – not all progress can be said to be good progress.

But perhaps the great innovator Henry Ford said it best:

“When a man begins to think that he has at last found method, he had better begin a most searching examination of himself to see whether some part of his brain has to sleep.”

Progress forces change and it’s up to people like me, and other senior management of companies, to make sure that we adapt as the world does around us while staying focussed on our clients.

More from AMWatch

Further reading

Latest news

Watch job

See all jobs

See all jobs

Latest news from FinansWatch (dk)

Latest news from EnergyWatch

Latest news from ShippingWatch