Next in asset and wealth management 2025

Executing the strategies to build a next-generation asset and wealth manager

Piecemeal transformation efforts are no longer effective in asset and wealth management (AWM). Firms are now wrestling with the twin challenges of expanding into the unfamiliar markets that investors are demanding, such as private credit or crypto, while facing more competition for control of a slower-growing pie of assets. For example, mass-affluent investor assets are projected to grow at a calendar average growth rate of 5.4% through 2028, according to PwC’s Asset and wealth management revolution 2024 report, a step down from the 6.8% pace of growth from 2019 to 2023.

A holistic strategy for reinventing how you operate, grow and innovate will, in the long run, be more efficient than addressing each individual business model pain point.

Some firms are responding to the business model pressure by pursuing a “winner-takes-all" mentality, using their size as an advantage. They're transforming themselves by gathering under one roof the assets, talent, technology and high-profile partnerships needed to thrive as a next-generation AWM firm. It’s a reasonable path. We project that business model pressures will winnow the ranks of AWM firms, with 16% of firms being bought or shuttered by 2027 — twice the rate of turnover historically¹.

Being big is not the only evolutionary path, though. There’s an alternative route where a firm’s operating model transformation allows its costs to drop as the business scales up; and as the firm's AUM increases, that growth allows larger investments in technological capabilities that further make the operating model more scalable and cost efficient. This reinforcing fusion of business model scalability, AUM growth and technology investments is a sustainable approach, naturally growing alongside business expansion. Perhaps its most important, built-in feature is that it focuses management’s attention on the most efficient uses of the firm’s capital, acting as a brake on the operational bloat that can come from growing too fast.

Time is of the essence. AWM leaders can no longer delay their transformation efforts as socio-economic, investment and funding disruption sweep aside old ways of doing business.

Transforming your business to win

It is no secret that the largest asset and wealth managers, traditional or alternative, are building the operational engines that they think are critical to their value proposition. For example, some are focusing their effort on building dynamic and scalable private equity or private credit origination platforms to populate their product offerings and then, where possible, fund or sell the remainder of those deals into secondary markets. At every step of building new operational engines, AWM firms are deploying technology to incorporate flexibility, allowing them to adapt as markets, taxes, regulations and more change.

Digitization has to be the foundation of those engines to address the tax, reporting, custody or customer interface requirements of a new distribution channel for an existing investment product. Manual or time-consuming processes can stymie AUM growth, especially if the retail alternatives market is on your growth agenda.

That’s not to say that a firm has to build it all. Managed services, SaaS offerings and outsourced tax services can offer a certain amount of customization at a cost that’s less than proprietary systems.

Tax is especially complicated as private market assets are in high demand. Tax is being asked to reallocate resources to more directly interface with customers given the complexity of many new fund structures. In addition, tax must deliver feedback at “deal speed” on the characterization and location of investments within the structure, while also continually developing tax-efficient incentive compensation strategies for deal and back-office professionals. AWM companies are also focused on controlling expenses at the management company level as many investors are expecting lower fees. Tax managed services can be a powerful choice to not only fill gaps but significantly boost what tax can accomplish while lowering overall spend.

Chasing growth through mergers, partnerships, private markets

AWM firms are increasingly examining mergers and acquisitions and strategic partnerships to reinvent their business models as no one firm has all the capabilities in house to serve today’s increasingly diverse investment needs. Such transactions enable firms to add capabilities, grow with new asset classes and investor segments or by building new channels to capture more of the investor wallet. Such strategic moves may also create scale and efficiencies, assuming your firm can meet rising investor demand for liquidity, transparency and reporting.

Among the ways AWM firms are enhancing growth through M&A include:

Asset managers are seeking to diversify by focusing on expanding into or scaling up private asset classes, capturing flows from new distribution channels and investor segments or accessing new geographies.
Wealth managers, particularly those sitting inside larger banks and insurers, are exploring strategic partnerships to grow revenue, optimize cost structures, reduce their supervisory burden, gain new capabilities and access to new pools of clients and advisors. As we outlined in our 2025 Deals outlook report, such collaborations enable firms to capitalize on shared revenue opportunities while strategically streamlining back-end operations for efficiency gains and cost reductions.

Evaluating potential mergers, acquisitions and partnerships involves analyzing a wide range of priorities on both sides of a transaction, including shared objectives, operational risks, upfront transition costs, recurring cost-saving and revenue synergies. Evaluations will also involve meticulous assessment of financial, operational, cultural and regulatory factors that could affect the integration timeline and deal value creation.

Leverage GenAI as part of strategic digital investments

AI is transforming asset and wealth management — offering new revenue, enhanced experiences, operational efficiencies and more. 45% of AWM respondents in our 2024 Cloud and AI Business Survey said that, over the coming 12 months, AI will help them achieve “new revenue streams.” Almost as many (43%) said AI would speed up time to market and improve the client experience.

Recent advances in generative AI (GenAI) have made it impossible for the AWM industry to ignore this emerging technology. Across your organization GenAI’s applications are multiplying — from operations, to finance, to research and analytics, to risk management, operations, investment relations, compliance and M&A. GenAI can massively improve your operational efficiency by, for example, enhancing data collection and sharing across your firm as well as your ability to mine structured financial data and unstructured data, such as investor documents. It can also significantly improve your ability to analyze a client’s portfolio and recommend investments based on their risk tolerance, financial goals, personal circumstances and retirement horizons.

GenAI can also gather and analyze data on companies, read and summarize quarterly reports, execute trades, keep records and generate first drafts of tax and regulatory reports. It can work on customer segmentation to improve marketing effectiveness. For wealth managers, GenAI can even answer client questions about the advice your firm is offering. It can enable smaller firms to compete with larger ones in research, sales and technology because GenAI has the ability to “democratize” coding.

We also see it helping firms achieve previously out-of-reach goals for both cost savings and productivity gains, which fuels faster growth and, in turn, greater value creation and greater AUM.

To maximize GenAI’s benefits, leaders should consider their firm’s AI readiness with an assessment framework that covers technology, data, governance, culture, strategy and your time frame for the investment. Leaders must also build a team around GenAI and foster user and customer trust with a secure technology environment that adheres to responsible AI practices.