The asset and wealth management (AWM) industry’s revolution is well under way. Assets under management (AuM) are increasing, as are costs and revenues. But even though costs have gone up, they have not 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.
Against this backdrop, asset and wealth managers are experiencing significant pressure on profitability in certain regions of the world, with other regions expected to feel the impact in the years ahead. Managers are also 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. This paper outlines our predictions for management and performance fees from now until 2025 and identifies how managers should react.
In line with the trends we identified in our recent paper Asset and Wealth Management Revolution: Embracing Exponential Change (AWM Revolution), we outline four foundations upon which managers can build a target operating model to protect or even improve profitability:
According to our analysis of the annual reports of 64 managers, operating margins have returned to the levels they were at before the global financial crisis and assets continue to show strong growth. Despite this, fees are falling quickly, and although managers have lowered costs, the real challenge will be protecting or improving profitability in the future. The AWM industry will need to continue pushing efficiencies while balancing costs as it adapts to changes ushering in a new era. The future will look very different, but just as bright.
Global Asset and Wealth Management Leader, Partner, PwC Ireland (Republic of)
Tel: +353 (0) 1 792 8719
Global Asset & Wealth Management Advisory Leader, Partner, PwC Ireland (Republic of)
Tel: +353 1 792 6247
US Asset & Wealth Management Leader, Partner, PwC United States
Tel: +1 (410) 215 0627