Pressure on profitability
The asset and wealth management (AWM) industry’s revolution is well under way. Assets under management are increasing, as are costs and revenues. But even though costs have gone up, they haven’t risen as quickly as revenues for multiple reasons, including economies of scale and the slow adoption of new technologies. However, as investor and regulator pressures build and companies invest in infrastructure and talent, costs are likely to begin to creep up.
Asset and wealth managers are dealing with unparalleled challenges and developing opportunities presented by intense fee pressure, product innovation, the continuing realignment of existing distribution channels, and the development of new ones.
Investors are looking to the AWM industry to provide value for their money. The constant introduction of new regulations amid competitive developments in the market will push managers to be even more efficient and to lower pricing.
Managers must decide whether they’ll operate as scale or niche players. Either choice means changing certain things about the business – by determining the product range, target markets and distribution channels – and striving for operational excellence.
Managers that have yet to double down on technologies and analytics that enhance the investment process and the distribution function will fall behind.
The AWM industry will need to fundamentally change its culture to entice new talent to join and help upskill current talent.
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