- Morgan Stanley and Oliver Wyman just published their annual blue paper on wholesale banks and asset managers, highlighting growing pressures on the asset management industry.
- As part of the study, the two firms set out their predictions for compensation spending by role across both wholesale banking and asset management.
- Technologists are going to be in demand, with engineering, tech, quant and analytics staff making up a bigger chunk of bank front office operations, and IT making up a huge portion of the back office. There’s a similar story in asset management.
- The report estimates that up to 40% of the asset management workforce “will require fundamental re-training.”
The finance workforce of the future is going to look very different.
That’s the conclusion of the annual Morgan Stanley/Oliver Wyman blue paper on wholesale banks and asset managers, published Wednesday. The report highlights intensifying cost pressures on asset managers, which will in turn translate into added cost pressures for the wholesale banks that serve them.
And that dynamic is going to have significant repercussions for those employed in the finance industry. The report said:
“As banks adopt new technologies and build new businesses, the talent model will need to shift profoundly. In the front office, demand for quants will increase significantly, while technology experts such as user experience (UX) specialists will need to be aligned with business teams to enable agile proposition development. We estimate these two roles will grow to represent 25% of compensation from
“In the back office, IT will make up ~60% of future compensation, driven by higher salaries for more specialized, in-demand technology skill-sets such as user interface (UI) developers.”
The same is true for those working in the asset management industry. The report suggests asset managers could cut costs by 30% as a result of investments and advancements in automation and outsourcing. The report said:
“We expect headcount to reduce due to automation and externalization of the skill-set. We also estimate that up to 40% of the workforce will require fundamental re-training. This will be most significant in portfolio management and asset administration roles where the use of better data and analytics will transform roles.
“As a result, compensation structures will shift. Investment management will continue to demand the lion’s share of compensation spend. Technology and Data Management’s share of compensation will grow fourfold whereas relative spend on automated back office functions will decrease. The share of Distribution will remain largely flat but we expect this role to shift most fundamentally as data and technology will be increasingly important at the interface to customers.”
To be sure, there are challenges. For one, attracting these skilled technologists to finance can be difficult, with the report saying “wholesale banks will need to evolve their talent models to compete.”
And for asset managers, the retraining of 40% of a workforce isn’t likely to come easy.
“Overseeing this transition should be a CEO role,” the report said. “The depth and speed of change required far exceeds the traditional change management process handled by HR departments.”
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