FundForum Monaco 2026: fund managers must innovate to stay relevant, experts say
Industry leaders discussed AI, ETFs and the future of private wealth at FundForum 2026 in Monaco (Ty DG/Pexels)
Greater diversity in AI-related exchange traded funds and closer engagement with the needs of private wealth clients could help managers compete in an increasingly crowded market, wealth management executives said at FundForum Monaco. Their comments came as industry leaders warned of relentless pressure on margins, given the wide availability of passive ETFs.
Dan Kemp, former chief investment officer at Morningstar, said fund managers have a "real opportunity" to "build genuinely different portfolios" for private wealth clients at a time when return dispersions from AI-aligned company stocks are set to increase.
He told MandateWire Analysis that fund managers have faced "relentless fee pressure" during the past two decades, as many institutional and private wealth clients have opted for cheaper passive ETFs.
But now, Kemp explained, fund managers could consider underweight positions in some parts of the AI universe. This would help their products stand out in an industry where many ETFs, including those capturing emerging market companies, have significant exposure to AI disruption.
More diversity in ETFs tracking companies exposed to AI could be beneficial to clients, and provide a boon for active fund managers.
BlackRock wrote in June that Asia technology ETFs have seen strong inflows as investors have sought exposure beyond US equities. It added that tech-heavy markets, including Taiwan and South Korea, have also become an increasingly large part of emerging market benchmarks.
Given the wide exposure to AI, Kemp explained, "there is a real opportunity for portfolio managers [and] fund managers to build genuinely different portfolios, but it requires a lot of institutional strength to allow them to do that, because the underperformance might be pretty big in the near term".
But he cautioned it was important for managers to avoid being "hubristic" around the size of this underweight.
Competition for private wealth clients
At the conference, industry commentators argued that in a competitive private wealth management space, asset managers would need a stronger understanding of how their strategies fit within wealthy clients' managed portfolios.
Anastasia Georgiou, director of market expansion strategy at Morningstar, said asset managers have tended to be "very product focused", but now need to tailor their offerings more closely to the needs of private wealth clients and financial advisers.
Across the UK managed-portfolio landscape, only around 1,300 funds are available, she said.
"If you're a UK asset manager and you want access to UK [adviser] flows, you've got to be sitting within those portfolios," Georgiou said.
Managers will have to work out how their products improve outcomes, sit within wider managed portfolios and fare against direct competitors, she explained.
The challenge of understanding private wealth clients is especially tough given the overriding focus on cost competition in the managed portfolio landscape.
Last year, Morningstar found the median total cost of a passive managed portfolio was 0.25 per cent in 2025, comprising a 0.12 per cent management fee and 0.13 per cent in underlying holding costs. By comparison, active-style managed portfolios had a median total cost of 0.73 per cent, consisting of a 0.24 per cent management fee and 0.49 per cent "look-through" costs.
This tight competition and cost pressure "may explain the growing use of passive holdings", Morningstar said.
Asset managers also face high sunk costs when bringing new vehicles to market.
Amin Rajan, chief executive of Create-Research, told MandateWire Analysis that "the churn rate is huge", adding that it is "expensive to produce [new] products only to find that they remain sub-scale after five years".
AI upends traditional wealth manager model
Aside from the high innovation costs, wealth managers could face high operational costs as they either develop their own AI tools or bring external capabilities in-house.
Kemp said large wealth management businesses face a "great challenge" adopting AI, and could be tempted to "buy ... innovation in", if they lack the organisational agility to develop their own tools.
Others at FundForum noted that wealth management clients were growing more empowered in the AI era to challenge advisers on the information they receive.
Charles-Henry Monchau, chief Investment officer at the Geneva-headquartered private bank Syz Group, told the crowd that clients now have better access to financial information, and are more financially literate.
He added: "When you prepare an investment proposal for them, it usually goes through Claude or ChatGPT, and they come back to you and say, 'Your proposal is rubbish'. So, you need to adapt to that."
Georgiou echoed this, noting that financial advisers are "having their homework checked by ChatGPT or Claude, and this is creating lots of questions from the investor".
Dan Hall, wealth and asset management leader for the UK and Ireland at EY, said clients' needs are becoming more complicated to meet. However, there are opportunities for managers to simplify their products to stay relevant in a noisier, technology-informed era.
"Customers need easier access, they need clearer outcomes, clearer products," Hall said.
"We need to remove nodes in the chain. If you're wanting ... to invest in an asset, there'll be multiple parties, maybe 10 in a chain between you and that end-investment. All of that is adding cost and friction to the service," he added.