Asset & Wealth Management Revolution: Pressure on profitability

Pressure on profitability and unparalleled challenges and opportunities

The Asset and Wealth Management Industry is at a turning point. Fee pressure is top of mind for asset managers across the globe. Despite continued increases in revenues and AuM as a result of high-performing markets and managers, the two are not growing in lockstep. Asset managers are facing increasing pressure from investors and regulators to decrease their fees, while price competition and product innovation continue to mark the current AWM landscape.

Asset and Wealth Management: Pressure on profitability outlines four foundations upon which managers can build a future-fit operating model.

1. Articulating value for money: Asset and Wealth managers are facing intense investor and regulatory pressure to provide value for money. Investors want more for less, and regulators want firms to provide value other than providing returns for investors. In order to meet these demands, managers must lower their costs and rethink their fee models and operations. This includes cross selling, fee innovation, and innovating product offerings. Smart beta and active ETFs are particularly promising options for managers, reaching investor target outcomes at lower prices.

2. Strategic Positioning - what's the plan? If asset and wealth managers are to succeed in an ever-changing investment landscape, they have some important decisions to make. They must reconsider their product offerings and operating models, in order to ensure that they align with investors' wants and needs. Firms must choose between going niche or scale. They must also undertake product rationalisation, closing underperforming and costly funds.

3. Transform through technology - or be eliminated: In order to operate efficiently while keeping costs at a minimum, asset managers must digitise their operations. The emergence of digital technologies such as Artificial Intelligence and Machine Learning is a significant opportunity to streamline operations. Historically, the AWM industry has long been a digital laggard. However, time is running out and these managers must embrace these technologies, or risk feeling the increased pressure of declining margins.

4. AWM - fight the battle for talent: As the investment landscape changes, it follows that the investment workforce must also change. In order to harness the opportunities provided by the digital technologies that are redefining the industry, asset managers must search for tech-savvy and young workers. In order to do attract and retain this future workforce, the AWM industry must rethink its working culture and upskill its current workforce.

Figure 1: Evolution of global mutual fund management fees by region, 2012 to 2025 in %

Note: Management fees are measured as an end-of-year, AuM-weighted average. These figures include both retail and institutional share classes of mutual funds and ETFs. Percentage changes may not correspond due to decimal approximation.

Source: PwC Global AWM Research Centre analysis; past data based on Lipper and Morningstar

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Steven Libby
Asset and Wealth Management Leader, PwC Luxembourg
Tel: +352 49 48 48 2116
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Dariush Yazdani
Market Research Centre Partner, PwC Luxembourg
Tel: +352 49 48 48 2191
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