BOSTON — An overly disillusioned Generation Y, the exploding middle class in emerging market nations and the foresight to embrace new ways to reach investors will provide opportunities to the asset management industry.
So said Penny Alexander, senior vice president of Franklin Templeton Investments.
Alexander made her remarks Thursday in her keynote address at the NICSA General Membership Meeting.
Alexander did not fail to underscore the opportunities of baby boomers, given that the average 401(k) balance is $70,000.
"How are they going to stretch those 70 Gs until they are 90 years old?" Alexander asked. "This is a tremendous opportunity for us to help people plan for retirement and their longevity."
As for Generation Y — those people in their 20s and their 30s — they have become more risk-averse than their grandparents did in the aftermath of the Great Depression, Alexander said. It is important to remember that since 1926, the market has delivered an average return of 9% a year, she noted.
"All is not lost," Alexander said. "Not all markets had a miserable decade in the 10 years ended Dec. 12, 2009. The Columbia stock market rose an average of 32.2% a year in the decade. Peru's rose 26.5%, Czechoslovakia's 25.9% and Brazil's 19.9%. These are the kinds of stories that we need to remind Generation Y about."
The asset management industry needs to adapt readily to new technologies and ways to reach customers, particularly this younger group.
Like many other speakers at the NICSA conference, Alexander paid homage to Steve Jobs, founder and former chairman of Apple Inc., who died at age 56 Thursday morning. Alexander noted that Jobs' vision transformed personal computing.
Similarly, Alexander and other speakers said, the asset management industry must embrace new technologies and find ways to differentiate firm brands.
Using the music industry as an example, Alexander said, "Think of all the ways you have been able to listen to and purchase music,. Vinyl records peaked in 1977 with 534 million units sold. Cassettes' heyday came in 1990, with 530 million units sold. CDs peaked at 995 million units sold." Digitized music, which has yet to reach its apogee, had 1.2 million downloads in 2009, she noted.
"Here's another example: how many years it took mass communication to reach 50 million users," Alexander said. "Radio took 38 years, television 13 years, the Internet four years, and the iPod three years. Facebook, which added 200 million users in one year, now has 750 million users."
Alexander said the middle class in nations in emerging markets is projected to grow, from 3.3 billion in 2006, to 5.1 billion by 2025.
True, Alexander admitted, these households are characterized as having earnings of a mere $6,000 annually. But try putting this in perspective, she suggested. In terms of growth in assets under management, the forecasted growth for mutual fund assets under management over the next decade is projected to be twice that of the U.S. in Asia and three times in Latin America.
Lee Barney is the editor of
