Today saw the publication of PWC's Global Asset & Wealth Management Survey which contains the prediction that one in six asset managers will disappear by 2027. Our Group CEO, Ian Partington, comments on why this can be viewed positively by the industry and how modern systems can also drive down costs, as reported in Professional Adviser. Read the article here
Transcription
One in six (16%) asset management firms are predicted to 'disappear' over the next four years as the industry faces a wave of consolidation, according to PwC.
The audit firm's 2023 Global Asset & Wealth Management Survey - published today (10 July) - found that inflation, market volatility and rising interest rates were pushing fees down for asset managers, pushing the rate of turnover for firms to twice its historical rates.
As a result, 73% of asset managers said they were considering strategic consolidation with another asset manager in the near future to gain access to new segments of the market, mitigate risk and build market share.
The top ten largest asset managers are therefore expected to control half of all mutual fund assets globally by 2027, up from 42.5% in 2020, the survey found.
Throughout 2022, global assets under management (AUM) fell by nearly 10% from $127.5trn (£99.8trn) to $115.1trn, the largest decline in a decade. However, this is expected to reverse by 2027, with AUM reaching a record $147.3trn.
PwC Ireland global asset and wealth management leader Olwyn Alexander said: "Existential challenges are sweeping the asset and wealth management industry against a backdrop of social, economic and geopolitical disruption. The choice is simple - adapt to the new context or fail.
"Firms that effectively leverage technology such as generative artificial intelligence and robo-advisers, build meaningful inroads to new and existing customers, diversify their recruitment and deliver exceptional client experiences will be well-positioned to not only survive, but thrive."
Third Financial chief executive Ian Partington said the findings from the survey should be viewed positively by the industry.
"Consolidation is a normal part of any industry. It helps to establish economies of scale that drive down the cost of the service, making it more affordable for the end-client. For wealth management, this means closing the advice gap, meaning more people who would benefit from financial guidance end up receiving it."
With wealth management a well known laggard on the technology front, Partington warned firms would need to both simplify their operating models and future-proof their technology in coming years.
"[This means] new acquisitions are onboarded seamlessly and new colleagues and clients - especially the next generation - are retained," he said.
"These transactions should be seen as a benevolent force in a fragmented industry, driving up standards."
He concluded: "For clients, having their wealth manager acquired can undoubtedly be unnerving. What better way to win over these clients than with a drastic improvement to the system they use to view their portfolio and engage with their adviser?"