The former CEO and co-founder of Aberdeen Asset Management offers his views on the current state of the asset management industry.

Martin Gilbert sees the current state of play in the industry as awash in commoditized products and if firms, particularly mid-sized firms, don't adapt, they will become history, the current Chairman of Revolut and AssetCo wrote in a commentary in «Financial News» (behind paywall).

One of the problems with the industry, Gilbert says, is that «large swathes of it is commoditized and awash with products that are almost identical in terms of both investment approach and performance.»

Importance of Scale

There are currently 200 asset managers with assets under management (AUM) of €50 billion ($53.4 billion) or more, of which the top ten have a 36 percent market share and the top 25 account for 56 percent, he wrote, citing a recent analysis from «Numis.»

To Gilbert, that illustrates «the importance of scale or, alternatively, being a smaller firm focused on offering a small number of strategies». That leaves the firms that are caught in the middle facing the most risk that doesn't understand the «significant structural changes taking place.»

Active vs Passive

Among those structural changes is the shift from active to passive investing, public to private markets, more regulatory oversight, the downward pressure on fees, or the change of focus on individual investors from institutional ones, Gilbert wrote.

Given this, weaker mid-field firms will either be acquired or face continued pressure from more nimble competitors, new market entrants or gobbled up by a larger firm, Gilbert warned.

Adapting Business Models

Survival depends on adapting business models and product offerings, which could entail «right-sizing» the firm, getting rid of less profitable units, or incorporating investment offerings that complement existing ones.

In the end and above all, «they will need to have a relentless focus on clients. Those asset managers that fail to take action will be history within five years», Gilbert predicts. 

Retirement in 2020

Gilbert was a co-founder of Aberdeen Asset Management in 1983 and served as CEO from 1991 until 2017 when it merged with Standard Life, and become Standard Life Aberdeen. In that entity, Gilbert was co-CEO and vice-chairman until his retirement in 2020.