Asset and wealth managers face a profitability paradox

For asset and wealth managers, the next five years should be a golden era of growth. Assets under management are projected to increase from US$139 trillion today to $200 trillion by 2030, with revenue growing by more than $200 billion. Yet profits margins as a share of those assets are projected to drop steadily. In PwC’s Asset and Wealth Management Revolution 2025 report, 89% of asset managers detail profitability pressure over the past five years, yet only one in four say they’re very confident in their fund’s profitability strategy.

The margin pressure stems from a range of structural issues. Investors are more sophisticated, demanding, and resistant to fees. Disruptive technologies like AI are increasingly augmenting standard tasks such as portfolio construction and client communications, requiring technology investments but also eroding the advantages that advisors long held. Cost pressures are persistent—the industry’s cost-to-income ratio is stuck at around 68%, which is higher than at many banks. And competition from fintechs, insurers, and other players keen to tap into the growing asset pool is relentless.

Because of these issues, relying on asset growth isn’t a winning strategy. Instead, players must rewire their business model, translate disruptive technology into opportunity, and secure their relevance in a market where investors’ profiles and demands are shifting.

They can start by weighing five strategic considerations:

Where should you integrate, collaborate, or acquire? Do you want an integrated model spanning the full value chain, or do you want to hand off non-essential, commoditised, or infrastructure-heavy activities to partners or suppliers?

Which parts of the client interface should you own? Do you want to own the client interface through digital platforms, advisory ecosystems, and data-driven personalisation controlling the economics of distribution? Or would you rather focus on being a product supplier for others?

How do you make tech investments count? How can you go use technology to reduce inefficiencies and boost performance, while channelling savings into initiatives that drive business value? How can you make sure that your workforce has the skills to make the most of new technology?

Where should you sit in the investment value chain? Should you design integrated solutions that meet client outcomes, such as pension portfolios or multi-asset mandates? Should you focus on providing the specialist strategies and products that others integrate into those solutions? Or is a hybrid model the right approach?

How will you balance orchestrating ecosystems and participating in them? Do you want to orchestrate ecosystems that bring together a range of partners including fintechs, banks, insurers, and data providers? Or do you choose to be a specialist participant within these ecosystems?

Given the unrelenting margin pressure, success depends on anchoring strategy around a clear centre of gravity—scale, solutions, cost leadership, or focused specialisations.