As went asset levels, so followed revenues and operating profits. Revenues dropped 4.8% on the year and operating profits ended 2002 7.9% lower, according to CRA Business Strategies Group’s (BSG) annual Competitive Challenges survey.
Perhaps most shocking in the data was not that assets declined, but rather that new sales did not recoup the loss. “While it is not surprising that asset growth stalled during the heart of the bear market,” commented Don Rogers, BSG’s Chief Executive Officer, “it was the first time in the history of our survey that money managers were unable to offset negative market returns with new sales.” This came as net sales in 2002, on average, hit the skids to a new three-year low of approximately 3% of total assets under management, compared to 6.6% in 2001.
The low sales figures were not from a lack of trying. On average, firms accumulated new assets equivalent to approximately 19% of assets under managementwell above sales levels during the bull market. However, investors closed accounts and withdrew assets at a rate of about 16% of assets under management.
“The data is significant in that it shows asset losses from existing clients undermining money managers’ success rate in attracting new assets. It also shows that money managers need to be more creative in attracting and maintaining new assets and in managing resources more cost effectively,” Rodgers explained.