Asset and wealth management (AWM) chief executives remain very confident about their companies’ growth prospects in 2018, but they are also aware that forces of regulation, technology and changing consumer behaviour are ushering in a period of disruption, according to PwC’s 21th Global Survey.
The survey questioned 126 of the AWM sector’s chief executives about the threats and opportunities facing their companies.
The research showed that 87 percent of AWM chief executives are confident about revenue growth in 2018 – slightly lower than in 2017 when 92 percent were this optimistic. AWM bosses’ three biggest concerns are over-regulation (83 percent), geopolitical uncertainty (80 percent) and tax changes (77 percent).
While 70 percent of the surveyed believe changes in core technologies will prove ‘disruptive or very disruptive’ over the next five years, just 38 percent believe that robotics and AI can improve the consumer experience. Also, almost three quarters (73 percent) are ‘somewhat or extremely concerned’ about cyber security threats.
Although assets under management (AUM) will be buoyed by rising asset prices, and PwC estimates that by 2025 global AUM will have almost doubled – rising from $84.9 trillion in 2016 to $145.4 trillion in 2025 – major changes to fees, products, distribution, regulation, technology and people skills, mean it won’t be business as usual in the years to come.
“Although optimism is a strong characteristic of asset and wealth management chief executives, they are definitely beginning to appreciate both the magnitude of potential disruption in its various guises and the challenge of finding new ways to gain scale and differentiate their product offerings in order to maintain and grow market share,” said Elizabeth Stone, UK asset and wealth management leader at PwC.
“Artificial intelligence, robotics, big data and blockchain are all transforming the way asset and wealth managers work. Some firms are further ahead than others in exploring these, but all firms needs to ensure technology is front and centre of their business models, especially as barriers to global business are likely to continue to rise. It’s also important not to forget the uniquely important role of human talent in this industry. Finding and retaining the best people remains a key differentiator in a competitive market.
“London truly is a global centre for investment management and, with just over a year to go until the UK leaves the European Union, Brexit will undoubtedly be one of the top disruptors for the industry in the year ahead. Whilst the asset and wealth management industry hopes to have more clarity on transition by the end of this month, in our view, firms need to continue planning for a ‘hard Brexit’ and accelerate their focus on moving from planning to implementation. Firms should use Brexit as an opportunity to reassess their business models and strategy in light of the disruptors highlighted as a concern both in the chief executive survey and our AWM 2025 report.”