Confront the challenges to seize the opportunity – final insights from PwC’s Asset Management Tax Conference
June 19, 2017
Delegates to PwC’s Asset Management Tax conference in May understand all too well the challenges they face, from tougher regulation to more demanding tax authorities, and from the difficulties of dealing with data to mounting cost pressures in a market where margins are harder than ever to protect. The good news, however, is that there is a genuine opportunity to emerge from these challenges in a stronger position to compete.
The key will be to put investors at the heart of the business – the underlying theme for PwC’s London event. And if that sounds obvious, tax managers must ask themselves whether it is an idea they can honestly say has always formed their function’s strategy. Fortunately for those tax functions that have struggled with that objective so far, one consequence of the pressures they face today will be a renewed opportunity to connect with the client base.
To see why, consider the “know your customer” regulation. For while KYC rules might have once have been a simple compliance exercise that saw asset managers do the bare minimum, today’s regime requires a much greater commitment – understand your customer might be a better description. And just like in any other industry, asset managers that understand their customers will have an advantage over their competitors.
What does this mean in practice? Well, PwC’s conference saw asset management tax partners from around the globe share their observations. The key takeaways include:
- The data that asset managers are now required to collect from customers, if managed effectively and appropriately, can be the key to delivering much more targeted products and services to individual clients. Having provided so much data, investors will naturally expect asset managers to respond accordingly with the right offer – those managers that exploit the insights in their data may even be able to anticipate investors’ needs in advance. You can read more about this in the blog by Rob.
- Investment in effective data management and analytics tools will transform asset managers’ ability to convert compliance responsibilities into growth opportunities. While asset managers may regard the increasing demands of regulators and tax authorities as a burden, their challenge now is to turn this burden to their advantage.
- One-size-fits-all is even less fit for purpose than ever. Investors will want fund structures designed to maximise their individual tax efficiency; having provided their data, they will press asset managers to identify which vehicles deliver the greatest tax advantages and then to offer such structures. Managing the competing demands of investors with different needs will be a key task. You can read more about this in the blog by Diya Wilson and Hazell Hallam.
- Could Funds disappear altogether? For some groups of investors, asset managers may eventually move to a more segregated model, in which each client has their own exposure to the underlying portfolio of assets, held in the most appropriate way for their needs and circumstances. Large investors, such as the biggest pension funds and sovereign wealth funds, have the power to call the shots.
- These lessons apply globally. In Asia, local investors are acutely conscious of tax status and structure, with many jurisdictions competing to offer tailored vehicles; competing in the region will require asset managers to confront this need. In the US, pension fund investors, for example, are more aware of issues such as tax leakage than ever before – the Trump administration’s plans for tax reforms that would enable the repatriation of capital, and therefore higher dividend pay-outs, will only accelerate this trend. In Europe, the eventual shape of Brexit will require asset managers to rethink fund structure and tax.
- Tax continues to move centre-stage within asset management firms. The tax function will become more visible than ever before, delivering a service that is aligned to the business’s strategic vision for the future – and playing an ever more significant role in the asset management value chain. Read more on this in the blog by Elizabeth Stone and Lachlan Roos.
This final blog concludes the series of post conference blogs and I would love you hear your feedback on this series. Also, if you would like to receive our publications in the future, attend next year’s conference or discuss how PwC can help your firm with any of the above challenges and opportunities, please contact me on [email protected].