In its research report Investing in the Future, the audit, tax and advisory services provider said established firms fail because they are focused solely on “sustaining innovation”.
“In other words innovating from the existing base,” said the report.
“They are therefore vulnerable to disruptive innovation, which can create new products, services, markets and value networks.”
The report said the investment management industry is no exception to this with KPMG already seeing signs of new entrants “challenging the status quo”.
“While relatively small at this stage, there are a number of emerging models leveraging a combination of technology, data, social networks and communities to bring fresh propositions to market which play to the evolving megatrends,” said the report.
Some of the examples in the report included companies such as Wealthfront, an online financial adviser catering to the young tech-savvy community; Dataminr and SNTMNT which monitor investor sentiment via Twitter to predict events and eToro, an online investment platform enabling investors to automatically copy the investment styles of other network members.
The report argued it will take time for the traditional financial services sector to rebuild trust for their brands in the aftermath of the financial crisis, which presents an opportunity for non-traditional new entrants.
“A trusted brand which resonates and appeals to a more diverse client demographic and a new generation of investors with widely different values and behaviours will be increasingly crucial to build scale,” the report argued.
KPMG said the investment management industry cannot rely on its history, “as it says itself, the past is no indication for the future”.
“We have seen many other industries which have been radically disrupted by the sudden emergence of new entrants from the traditionally non-competing industries,” said the report.
“Why could the same not be true for investment management?”
