Asset & Wealth Management Revolution: Pressure on profitability

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.

^{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}