After a tough year for the markets, asset managers are bracing for cost-cutting in 2023. Revenues were down across the industry last year as falling markets hit both management and performance fees. In the U.S., total assets in mutual funds and ETFs dropped 17 percent between the start of 2022 and the end of October, according to data from the Investment Company Institute. This will force asset managers to cut costs and make tough decisions this year about how to grow. Some asset managers are predicting that the downturn will accelerate the shift by clients from mutual funds and brokerage accounts to other ways of investing, such as ETFs, separately managed accounts, and model portfolios. Martin Small, head of BlackRock’s US wealth advisory business and the firm’s incoming chief financial officer, told Financial Times, “Whenever there are super shocks in the market, people make big changes to their portfolios. This is when people do deferred maintenance. In U.S. retail markets, there is a move from brokerage accounts to fee-based advisory, which means more model portfolios and more ETFs.”

Finsum:After a tough year in the markets, some asset managers are predicting a shift towards model portfolios, ETFs, and SMAs for clients.