A KPMG report says that the asset management industry is ripe for a wave of consolidation.

Editor's note: An earlier version of this story appeared on the North America sister publication of this news service, but is repeated here for the obvious relevance to other markets. Newer entrants to the asset management space – free from the burden of legacy issues and outdated systems - will thrive as the industry “radically transforms” over the next 15 years, according to a new report by KPMG.

“There is enormous opportunity for non-traditional players which, when combined with continued pressure on margins and the search for capabilities, will kick-start a wave of M&A activity,” said Ian Smith, financial services strategy partner.

The report – entitled Investing in the Future - predicts that by 2030 the client base of a typical asset manager will be “completely different” to what it looks like today as Generation X approaches retirement, Generation Y matures and middle classes in emerging countries - notably China, Mexico, India and Nigeria - grow.

But KPMG warns that the majority of business models today “will not be fit for purpose.”

“It is no longer just about attracting the clients who are armed with cash and ready to invest,” said Tom Brown, global head of investment management. “The successful asset managers of tomorrow must focus on building cradle-to-grave relationships with a dramatically different and more diverse client base from today, which includes much younger investors.” He noted that asset managers must be mindful that women are increasingly controlling a bigger share of family wealth, for example.

It is no secret therefore that technology will play a critical role in the future of the asset management industry – and indeed the financial services sector at large. But even though many players are pouring resources into ramping up information technology, Smith believes that funds are not being channeled into the right areas.

For example, asset managers have a long way to go to recognize and exploit the benefit big data and data analytics, he said. (Big data is a term used to describe the exponential growth and availability of data. The idea is that big data is difficult to process using traditional database and software techniques yet is increasingly regarded as crucial for businesses to boost operations.)

Meanwhile, business are spending too much time unpicking disparate systems and technologies, with an intense focus on ensuring “the right level of control” to meet compliance requirements, Smith continued.

Of course, issues around compliance and risk management is increasingly crucial as regulatory pressures intensify. But more resources should be deployed in revamping architecture, Smith said, noting that platforms will need to be “completely redesigned” to support a much more diverse client base.

Among other notable findings from the report, it is the “Apples,” “Googles” or large retailers of the world that could become the next big powerhouses in investment management.

“Trusted brands that resonate and appeal to a more diverse client base, as well as the younger generation, may be able to build scale quickly,” according to Smith. He said the firm expects to see mass consolidation and predicts that within 15 years there will be half the number of players currently in the market.

In line with this, the report predicts that most people will opt to buy investment products online rather than through an advisor in person, although this is of course likely to vary widely depending on an individual or family's level of wealth. As a sign of our time, clients will also increasingly draw on their own research in making investment decisions, supported by crowd-sourced opinions on “TripAdvisor-type” websites, he said.