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Press Release

Asset managers overlook culture as a competitive edge

Investment companies need to reimagine for whom and how they create sustainable value.

Investments
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June 5, 2019

Only a small proportion of asset managers have measured and actively manage their own culture

ARLINGTON, VA, June 5, 2019 — Only a small proportion of asset managers have measured and actively manage their own culture, according to a research paper by Willis Towers Watson’s Thinking Ahead Institute (TAI) entitled The asset manager of tomor. The paper suggests that successful firms recognize that culture is central to the attraction and retention of talent — the motivational forces that inspire strong performance and, ultimately, the creation of value.

“We see culture as a big differentiator in determining the successful asset management firms of the future,” said Roger Urwin, global head of investment content at the Thinking Ahead Institute. “But perversely, many firms are so hardwired to the use of precise measurements that they omit culture altogether in their strategy, treating it as a noncontrollable item. The dangers of this are particularly apparent when organizations confront growth and disruptive changes, as these put even effective cultures into reverse. In these situations it is only with considerable increases in the leadership energy and focus applied to culture that you can maintain its quality and consistency.”

The paper makes the case that diversity and inclusion are derived both from a business case and a cultural case. It describes the business case as enhancing the influence of team members from diverse backgrounds to produce deeper cognitive inputs, wider perspectives and better informed decisions. It describes the culture case as building a fairer and better culture that helps with motivation and wellbeing.

“We believe diversity and inclusion will become a cornerstone of the asset manager culture in the future,” said Urwin.

The paper highlights two other attributes of effective culture:

  • Cultural embedded in behaviors — leaders actively promote and manage culture; staff actively live out and experience culture
  • Culture synchronized with vision and strategy — organizations need clear linkages between these elements

In addition, the paper asserts that many asset managers are erroneously focusing on short-term, one-year planning and failing to support sustainable long-term value, putting them at serious risk of five-to-10-year existential threats. In the publication, the Institute argues that many asset managers have become distracted by short-term pressures and are failing to address the sustainability and competitive edge of their businesses, including undervaluing the pivotal role strong culture can play.

The paper also points to disruptions that pose the most challenge — and most opportunity — for the investment industry. The biggest disruptions are: margin and growth headwinds for investment firms; data, technology and artificial intelligence evolution; changes to the industry value chain configuration through employing new strategic relationship models, and new fee models and pressures.

“Dealing with such disruptions will be most effective through a positive cultural mind-set in being prepared for change,” said Urwin.

The paper also highlights the increasing need for more asset managers to innovate in multi-asset methods and solutions, implying changes of emphasis — notably with benchmark-based approaches giving ground to goal-based approaches, and strategic asset allocation giving ground to total portfolio approaches.

“Total portfolio thinking is leading a quiet revolution in investment strategy practice by being far more dynamic and goals-oriented than traditional approaches. The edge in total portfolio approaches over traditional thinking based on benchmarks is potentially massive. But in most situations the fulfilment of that potential will require meeting governance, behavioral and cultural challenges as much as the mastery of the technicalities,” said Urwin.

About the Thinking Ahead Institute

The Thinking Ahead Institute was established in January 2015 and is a global not-for-profit investment research and innovation member group made up of engaged institutional asset owners and service providers committed to changing and improving the investment industry for the benefit of the end saver. It has over 40 members around the world and is an outgrowth of the Thinking Ahead Group which was set up in 2002. Learn more at www.thinkingaheadinstitute.org.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential.

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