Ask investment managers to describe the year that was, and many sum it up in two words: Under pressure.
Fee compression continued, client expectations rose, investment offerings expanded, and operational demands grew more complex.
But pressure often sparks progress. In 2025, many managers didn’t just adapt—they grew.
Below, we explore five trends that defined the investment management landscape and look ahead to what’s shaping 2026.
From Product Expansion to AI Application: The 5 Key Trends That Defined Investment Management in 2025
Product Expansion: The Rise of SMAs and UMAs
As investor expectations increase and competitive pressure mounts, investment managers are expanding product suites to deliver more tailored value.
A defining trend of 2025 was the rapid growth of Separately Managed Accounts (SMAs) and Unified Managed Accounts (UMAs), two approaches designed to meet investor expectations for personalized portfolios.
According to Cerulli’s US Managed Accounts 2025 report, UMA and SMA programs posted strong compound annual growth over the last five years — 18.7 percent for UMAs and 18.3 percent for SMAs.
The appeal of SMAs lies in their flexibility. Rather than relying on prepackaged allocations, clients can tailor portfolios to include tax-aware strategies, personalized constraints, and specific investment preferences.
UMAs take personalization even further by combining multiple sleeves — such as SMAs, ETFs, mutual funds, and fixed income allocations — into a single, coordinated structure. This structure streamlines reporting, enhances oversight, and facilitates holistic portfolio management.
Together, the expansion of product offerings like SMAs and UMAs signals a decisive shift toward customization as the new standard. For investment managers, the challenge ahead will be to scale these offerings efficiently.
The Great Convergence of Wealth and Asset Management
According to McKinsey’s 2025 “great convergence” report, public- and private-market investing are increasingly converging, with “private capital managers [penetrating] deeper into wealth, defined-contribution, and insurance channels.”
The report estimates that, when combined with rising flows into active ETFs and a reassertion of local-market bias, these trends could mobilize between $6 trillion and $10.5 trillion in new capital over the next five years. This structural shift is reshaping the businesses of not only global asset managers but also wealth management providers.
Asset managers, once focused on public markets, are now building private-market capabilities to capture growing flows into alternatives. At the same time, wealth managers are integrating private investments into client portfolios to deliver differentiated value.
As a result, the traditional boundaries between wealth and asset management are becoming increasingly impractical to maintain. Firms are now adopting more integrated approaches, with providers offering portfolio solutions that blend public equities, fixed income, and alternative or private-market allocations—creating new, unified wealth- and asset-management models.
Fee Compression Is Here to Stay
2025 confirmed that fee compression is here to stay, and that the forces behind it are only set to grow stronger.
The expectations of a new generation of investors differ sharply from those of their predecessors. The Journal of Financial Planning reports that younger, more engaged clients prioritize financial independence, are digitally native, and are accustomed to hyper-personalized advice delivered through modern online experiences
At the same time, Cerulli Associates reports that affluent investors increasingly expect services that go well beyond investment management.
Managers now face a dual mandate: Expand value while reducing costs.
Achieving both these goals is causing many investment managers to reassess the sustainability of their revenue models. For many, this means moving away from a commission-based approach and adopting a predominantly fee-based structure.
Research indicates that a rising share of advisors now derives the vast majority of their revenue from fees: Today, 44 percent earn at least 90 percent of their revenue from fee-based models, a figure projected to reach 54 percent by 2026.
Meanwhile, the proportion of advisors who charge a combination of fees and commissions is projected to decline significantly over the next 24 months.
Looking forward, the firms best positioned to thrive will clearly articulate their value proposition, offer flexible fee structures, and broaden their service model to align with evolving client expectations.
Increased Operational Complexity and Scalability Needs
Historically, operational efficiency focused primarily on cost reduction and process optimization.
By 2025, as firms managed larger volumes of assets and more diverse products, operational demands grew. From compliance and reporting to portfolio management, managers needed systems capable of efficiently handling this increased complexity.
Today, operational efficiency extends beyond cost control to encompass the critical drivers of scalability: Flexibility, resilience, and speed in decision-making and execution.
As we move forward in the new year, firms that can scale seamlessly while maintaining high-quality client service will be better positioned to capitalize on opportunities and deliver consistent results.
Preparing for AI: Investment Managers Put Infrastructure First
A recent Institutional Investor report, “The Next Generation of Technology for Investment Management,” found that nearly all respondents agree their firms are actively evaluating—and planning to deploy—artificial intelligence, machine learning, and natural language processing to improve performance and reduce costs.
However, as investment managers adopt AI, success depends on one critical factor: A robust operational foundation.
Without clean, integrated data and efficient processes, implementing AI effectively becomes a challenge. Firms that invest in modern infrastructure—including APIs, connected systems, automated workflows, and high-quality data—will be best positioned to unlock AI’s potential, even if adoption happens gradually.
In short: AI readiness starts with operational excellence, making your firm's ability to manage complexity and scale a critical enabler for any future technology-driven opportunities.
Investment Management: What to Expect in 2026
The themes of 2025 — fee pressure, personalization, product innovation, operational modernization, and convergence — are not temporary. They are reshaping the investment management landscape for the long term.
In 2026, pressure will continue, but so will opportunity. Firms that succeed will be those able to:
- Redefine their value proposition in a fee-conscious world
- Offer personalized, tax-efficient, and flexible solutions
- Modernize operational infrastructure to support scale and AI readiness
- Deliver comprehensive investment solutions spanning public and private markets
Meeting these demands requires more than reactive fixes.
As product offerings expand and operational complexity grows, the right infrastructure becomes critical. Firms that adopt unified, flexible platforms now can simplify complexity, connect systems and workflows, and scale efficiently — all while laying the groundwork for sustainable growth and innovation.
Solutions like Genesis are designed to help managers modernize at their own pace, connecting portfolio management, trading, accounting, and reporting in a single, cloud-native environment. With every application drawing from the same shared data source, users can move and manage information seamlessly across the platform. By streamlining operations and enabling personalization at scale, firms are better positioned to navigate market pressures and capitalize on new opportunities.
With the right tools and approach, 2026 is not just another year of challenges; It’s a year of growth, differentiation, and strategic advantage.
Learn more about Genesis or get in touch to see it in action.
