At the end of last week, PwC attracted over 450 Asset and Wealth Management (AWM) professionals from companies collectively responsible for over 70% of the world’s assets under management (AuM) that are anticipated to exceed $145 trillion by 2025; over two days, delegates from 22 countries around the world considered “what’s next for the AWM industry”?
"Uncertainty is the norm, and we live in changing times. Globally, we are experiencing protectionism, pressing climate change, move to cities, growth of the middle class and seismic shifts in demographics. On seeking predictability, we know that our reliance on technology for greater efficiency and digitalisation will continue to grow. We will make it even faster, smarter, integrated and streamlined. We also know that no matter whatever the outcome of any political wind (for example, Brexit), the Asset and Wealth Management (AWM) industry will continue to adjust and adapt."
Keynote speaker, Rachel Lord (Head of EMEA, Blackrock) noted “we are emerging from a decade of low interest rates, relative geopolitical calm and implementation of regulatory reforms demanding transparency for the benefit of our clients”. Clients can rest assured that regulators are placing greater demands on asset managers not only in terms of fees, that are anticipated to fall by 20% by 2025, but also to educate, and propose suitably tailored products.
Meanwhile, asset managers are looking to deploy the cash (dry powder) that they have tasked to manage. What appears attractive, and what may beat the odds for those with patience and an appetite for risk, are alternatives such as infrastructure products, real estate and private equity. In terms of fees, there are 0% fee fund products, and asset managers get paid for performance. Exchange Trade Funds (ETFs), already popular in the United States and Ireland, are due to grow in both Europe and Asia.
The pressure is on for the industry to cater to the retiring population that may have limited savings, and could live on into their nineties. As they pass on, Boomers are due to make the largest inter-generational wealth transfer in human history to their millennial offspring, sometimes termed as the Digital Natives. Digital natives are soon to be the empowered majority. They have high service expectations, and are at ease with technologies, algorithms and platforms that offer them deep data science-driven advice, and automatically manage their portfolios. They are also keen on good governance, environmental and social responsibility (ESG). To succeed in the future, asset managers will need to provide easy to use adaptive and responsive platforms that also embed ESG-related investment offerings.
According to Andrew 0’Callaghan, PwC AWM Leader for Europe, Middle East and Africa, “we are living through the 4th Industrial Revolution, whereby the World Economic Forum predicts robotics and AI could remove 75 million jobs, it has the potential to create 133 million new jobs.” If planned properly, these new technologies will provide opportunities to those willing to reskill and take on analytical, predictive and productivity improving jobs.
Ultimately, asset managers care. Their goal is to ensure that people have the funds they need, when they need them, throughout their lives. It will be those asset managers who can scale, or can provide niche services, who are most likely to survive, and avoid being in the “murdered middle”. Survival will depend on providing value and being strongly aligned with clients’ interests, strategic positioning, having the right technology and being sure to attract talent with the right cognitive curiosity.
