Maybe the Future of Fund Management Isn't So Bleak

The growth of an affluent middle class in emerging countries, especially China, combined with the shift toward defined-contribution retirement accounts, where individuals are required to manage their savings, should continue to swell the industry's collective coffers.

After growing by more than a fifth last year, China is now the world's fourth-biggest fund management market, up from eighth place five years ago. The International Monetary Fund estimates the country's households save about 46 percent of gross domestic product, almost twice the global average of 26 percent. And BCG forecasts that assets under management in the region will triple by 2025, making China second only to the U.S. No wonder, then, firms including Anthony Scaramucci's SkyBridge Capital, Ray Dalio's Bridgewater Associates and David Harding's Winton are seeking to expand in China.

BCG makes a big deal about the challenge that technology poses to asset managers, which have typically been slow to implement automation in their processes. But automation should make servicing customers easier and cheaper, with improved access to transparent data about fees and returns generating increased investor trust in the industry. And there's enormous scope for personalized marketing that targets individual investment needs more precisely to attract extra business.

Moreover, BCG says automating back-office operations to reduce errors and anticipate "choke points" could deliver enormous efficiency gains, generating cost savings of more than 50 percent. There seems to be a lot of low-hanging fruit to pick.

The point is fees will probably continue to head lower, but so will costs. Markets will do whatever markets will do, but demographic shifts will continue to expand the number of customers who need to save for old age. And while they may have been complacent in the past, asset management firms are thus far proving to be rather resilient in the face of change.

And I'm sure the likes of BCG will be only too happy to guide them through their transformation into lower-cost service providers, benefiting either from economies of scale or from product differentiation — all for a fee, naturally.

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Mark Gilbert is a Bloomberg Gadfly columnist covering asset management. He previously was a Bloomberg View columnist, and prior to that the London bureau chief for Bloomberg News. He is the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."