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Stock Strategist Industry Reports

4 Traits Asset Managers Need for Success

Here's what we believe is required for these companies to thrive over the next decade.

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Although most of the traditional U.S.-based asset managers we cover continue to hit record levels of assets under management, driven by the bull market in U.S. equities, the past decade has been difficult for the industry. Between the 2008-09 financial crisis and the increased scrutiny of investment management conflicts of interest, the balance of power in the retail channel has shifted more heavily toward the distributors.

This has led to not only increased fee compression, with investors (put off by the poor relative performance of actively managed funds) increasingly seeking lower-cost index-based options, but also product rationalization on the major retail distribution platforms, with broker/dealer and advisory networks culling funds with poor performance records, high expense ratios and/or low inclusion rates. The recently announced merger of Charles Schwab (SCHW) and TD Ameritrade (AMTD), two of the largest U.S. discount brokers, will only add to the woes of the U.S.-based asset managers.

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Greggory Warren does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.