Trading conditions in the asset management sector are the toughest they have been for the past 10 to 15 years, according to Martin Gilbert, CEO of Standard Life Aberdeen PLC.
Speaking at the annual meeting of the Institute for International Finance in Bali, Indonesia, Gilbert said consolidation is required in the fragmented industry.
"It's the toughest it's been probably for 10, 15 years. It had a good run during the financial crisis; the liquidity has been good for asset management ... I think we're seeing an industry, which has traditionally operated at a 40% operating margin, now being disrupted," he said.
The asset management sector has faced a rise in regulation, while investors have increasingly looked to passive funds, such as exchange-traded funds, rather than active managers. Share prices in the sector have taken a hit as a result, with Aberdeen Standard Life trading at $14.90/share as of 4 p.m. ET on Oct. 11, down from $23.66 at the start of the year.
Gilbert added that asset management groups will have to "become more efficient, charge less and decide whether to go direct to the consumer."
Aberdeen completed a merger with Standard Life in August 2017, consolidating a £12 billion company. Gilbert said the move had been crucial to improving performance. "Thank goodness we did the merger because it allowed us to take out cost and make ourselves more efficient," he said.