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Asset & Wealth
Management Revolution:
Embracing Exponential
Change
Key messages and questions for relationship teams
to put to clients/prospective clients
www.pwc.com/assetmanagement
Why read this briefing?
Change in the Asset and Wealth Management industry is accelerating
at an exponential pace. Although the industry looks set for
rapid growth, asset and wealth managers must become business
revolutionaries, even disruptors, if they’re to increase profits and
prosper. Now is the time for action
This briefing outlines the report’s key messages, which are presented as a series of predictions for
transforming trends, supported by data and in-house analysis.
It includes questions for further discussion with clients and prospective clients about their strategy,
digital approach, people and processes.
2 PwC | Asset & Wealth Management Revolution: Embracing Exponential Change
About the report
The first section of the report sets out how the operating landscape
for asset and wealth managers will grow in AUM. In the second
section, the report explains four key trends that will incessantly
revolutionise the industry and explains how firms can adapt to the
changes ahead. Our overarching message is that there is significant
potential for growth in AUM (almost doubling to US$145trn by 2025
in the best case scenario) but that managers must act now. Waiting is
no longer an option in an industry where some haven’t developed as
much as in other industries.
Four trends will revolutionise the 3. Funding the future. Asset and wealth
industry: managers have been filling the financing
gaps resulting from the financial crisis. To
1. Buyers’ market. Fees are being pushed generate alpha, their involvement in niches
down by investors and regulators. Increased such as trade finance, peer-to-peer lending
regulation, competition and new entrants are and infrastructure will dramatically increase.
disrupting value chains and revolutionising Helping individuals to save for old age, as
wealth managers’ raison d’être. As low-cost governments step back, will also support
products gain market share, and larger players growth. Action is needed to capitalise on the
benefit from scale economies, there will gaps.
be further consolidation and new forms of
collaboration. Asset and wealth managers must 4. Outcomes matter. Investors have spoken
be “fit for growth” or they may either fail or be loudly. They want solutions for specific needs
acquired. They must act now. – not products that fit style boxes. Active,
passive and alternative strategies have become
2. Digital technologies: do or die. The industry building blocks for multi-asset, outcome-
is a digital technology laggard. How well firms driven solutions (which will increasingly
embrace technology will help to determine include environmental, social and governance
which prosper in the years ahead. Technology outcomes). Firms must either have the scale
giants will enter the sector, flexing their data to create multi-asset solutions or be content as
analytics and distribution muscles. The race suppliers of building blocks.
is on ...
Asset & Wealth Management Revolution: Embracing Exponential Change | PwC 3These four trends will transform the industry’s regulations such as the Retail Distribution Regime
nature and structure. Scale, price, diverse people (RDR) introduced in the UK in 2012 would be
and technology capabilities will characterise the mirrored by regulators in other geographies, with
largest firms. Smaller, specialist firms will prosper a significant impact on asset management and
if they offer excellent investment performance wealth management revenue models. Since 2014,
and service. The industry must act in three areas: these changes have accelerated and evolved.
They’re in the process of revolutionising the
Strategy sector.
Firms should reorganise the business structure
to support the differentiating capabilities and cut Set for growth in assets:
costs elsewhere. If interest rates remain relatively low globally and
economic growth is sustained, our projections
Technology
foresee assets under management (AuM) growing
Every firm must embrace technology as it impacts
from US$84.9 trillion in 2016 to US$111.2 trillion
all functions.
by 2020, and then again to US$145.4 trillion
People by 2025 (see figure 1). Retail (mutual) funds
Different skills are needed, backed by new (including ETFs) will almost double assets by
employment models. Firms must find and 2025 and institutional mandates will expand
develop people with new skills and adapt their similarly. What’s more, we think alternative asset
employment models to nurture and retain them. classes – in particular real assets, private equity
and private debt – will more than double in size,
The context: as investors diversify to reduce volatility and
These transforming trends have evolved from achieve specific outcomes.1
the six game changers we identified in our Asset
Management 2020 paper, published in 2014: Personal wealth is accumulating fast, mainly in
developing countries, and individual retirement
1. Asset management moves centre stage and pension funds are expanding. The industry
is set to manage a greater share of this wealth.
2. Distribution is redrawn – regional and global We believe the industry’s penetration rate
platforms dominate (managed assets, as a proportion of total assets)
will expand from 39.6% in 2016 to 42.1% by
3. Fee models are transformed
2025.1
4. Alternatives become more mainstream,
But growth has challenges. Geopolitics,
passives are core and ETFs proliferate
normalisation of interest rates, Brexit, China’s
5. New breed of global managers transition to a consumer-driven economy and the
potential changes in US policies on regulation,
6. Asset management enters the 21st Century. tax and trade all create uncertainty. Our most
conservative scenario still projects growth
Looking forward to 2020, the paper successfully
although substantially slower, resulting in AuM
forecast the rapid growth in industry assets under
of US$93.4 trillion by 2020 and US$107.8 trillion
management. It also predicted the shift from
by 2025.1
active management to passive, the rise of ETFs
and continued expansion in alternative asset
management. Notably, it also anticipated that
1 PwC Global Market Research Centre. For methodology see full paper.
4 PwC | Asset & Wealth Management Revolution: Embracing Exponential ChangeFigure 1: Total client assets in USD trillion
CAGR
Clients 2004 2007 2012 2016 2020e 2025e
2016-2025e
Pension funds 21.3 29.4 33.9 38.3 53.1 64.6 6.0%
Insurance companies 17.7 21.2 24.1 29.4 38.4 44.7 4.8%
Sovereign wealth funds (SWF) 1.9 3.3 5.2 7.4 10.0 13.6 7.0%
HNW1 37.9 50.1 52.4 72.3 93.4 119.9 5.8%
Mass affluent 42.1 55.8 59.5 67.2 84.4 102.2 4.8%
Total client assets 120.9 159.7 175.1 214.6 279.3 345.0 5.4%
Global AuM 37.3 59.4 63.9 84.9 111.2 145.4 6.2%
Penetration rate 30.9% 37.2% 36.5% 39.6% 39.8% 42.1% 0.7%
Sources: PwC Market Research Centre analysis. Past data based on Lipper, ICI, Preqin, Hedge Fund Research, EFAMA, City UK, Insurance Europe,
Financial Stability Board, Credit Suisse, Towers Watson, OECD and World Bank.
Highest growth rates in Asia, Developing Asia-Pacific’s dynamism is set to
Latin America spur growth of 8.7% a year from 2016 to 2020,
Growth will be uneven; on a percentage basis accelerating to 11.8% from 2020 to 2025.
it’s slowest in developed markets and fastest in This will lift regional assets from US$12.1 trillion
developing markets (see figure 2). Even so, we to US$29.6 trillion. Latin America is likely to
anticipate assets growing at 5.7% a year in North grow at similarly rapid rates of 7.5% in the former
America from 2016 to 2020, slowing to 4.0% from period, accelerating to 10.4% in the latter.
2020 to 2025, lifting assets from US$46.9 trillion From a low base of US$3.3 trillion the region’s
to US$71.2 trillion over the nine years. Similarly, assets are projected to increase to US$7.3 trillion.2
Europe is projected to grow at 8.4% and 3.4%
respectively over the two periods, with assets
rising from US$21.9 trillion to US$35.7 trillion.2
Figure 2: Global AuM by region in USD trillion Base scenario
5.5%
160
145.4
140 7.0%
120 111.2
7.4% 71.2
100
1.5% 84.9
16.8%
80 5.7% 58.6 4.0%
1.6
63.9
59.4 7.3
60 46.9 10.6% 9.5%
1.0
33.2 4.4 35.7
40
37.3 30.1 7.5% 10.4%
0.7
0.6 0.6 3.3 30.2
19.9 1.4 2.6 8.4% 3.4%
20 19.7 21.9
0.6 21.0 29.6
12.9 8.7% 16.9 11.8%
3.9 6.4 7.7 12.1
0
2004 2007 2012 2016 2020e 2025e
n Asia-Pacific n Europe n Latin America n Middle East and Africa n North America CAGR
Sources: PwC Market Research Centre analysis. Past data based on Lipper, ICI, EFAMA, City UK, Hedge Fund Research and Preqin
2 PwC Global Market Research Centre.
Asset & Wealth Management Revolution: Embracing Exponential Change | PwC 5Questions for clients
With change accelerating, all firms must decide how they will
compete in tomorrow’s world. Will they be scale or niche players?
How will they become more productive?
In our view, asset and wealth managers must address three questions:
1. Have you got the right strategy?
All firms must have a view of the landscape of tomorrow, a clear strategy and know their
differentiating capabilities. They should reorganise the business structure to support the
differentiating capabilities and cut costs elsewhere.3 As befits a time of great change, they must have a
long term view, take radical steps and invest in building their businesses strategically.
2. Are you prepared to make digital technology a key part of your business?
Every firm must embrace technology as it impacts all functions. Artificial intelligence, robotics, big
data and blockchain are transforming the industry. Technology will determine which firms are the
winners in a fast-changing landscape.
3. Are you changing your approach to hiring and nurturing people?
New skills are needed and new employment models must be embraced. Hiring and retaining the best
will depend more than ever on diversity and inclusion, and meeting the needs of the whole person.
Talent is a global challenge and excellent people with leadership skills will be vital as firms reinvent
themselves – moving into new countries, new technologies, different distribution channels and
leading-edge products.
3 https://www.strategyand.pwc.com/fitforgrowth.
6 PwC | Asset & Wealth Management Revolution: Embracing Exponential ChangeContacts
Olwyn Alexander Robert Mellor John Siciliano
Global Asset & Wealth Management Leader Partner Managing Director
PwC Ireland Asset & Wealth Management Asset & Wealth Management
olwyn.m.alexander@ie.pwc.com PwC UK PwC US
+353 (0) 1 792 8719 robert.mellor@uk.pwc.com john.c.siciliano@us.pwc.com
+44 (0) 20 7804 1385 +1 (646) 471 5170
Barry Benjamin
Partner Andrew O’Callaghan Dariush Yazdani
Asset & Wealth Management EMEA Asset & Wealth Management Leader Market Research Centre Leader
PwC US PwC Ireland Asset & Wealth Management
barry.p.benjamin@us.pwc.com andy.ocallaghan@ie.pwc.com PwC Luxembourg
+1 (410) 659 3400 +353 1 792 6247 dariush.yazdani@lu.pwc.com
+352 49 48 48 2191
Thomas Holly Justin Ong
US Asset & Wealth Management Leader Asia-Pacific Asset & Wealth Management Leader
PwC US PwC Singapore
thomas.j.holly@us.pwc.com justin.ong@sg.pwc.com
+1 (410) 215 0627 +65 6236 3708
Steven Libby William Taggart
Global Advisory Leader Global Financial Services Tax Leader
Asset & Wealth Management PwC US
PwC Luxembourg william.taggart@us.pwc.com
steven.libby@lu.pwc.com +1 (646) 471 2780
+352 49 48 48 2116
Subject Matter Experts
Fit for Growth/Business Digital & Technology People/Talent
Model Alignment Debasis Sahu Paula Smith
Hector Nelson Partner Partner
Partner Asset & Wealth Management Asset & Wealth Management
Asset & Wealth Management PwC US PwC US
PwC US debasis.sahu@us.pwc.com paula.e.smith@us.pwc.com
hector.nelson@strategyand.us.pwc.com +1 (646) 471 2878 +1 (617) 530 7906
+1 (212) 551 6405
Asset & Wealth Management Revolution: Embracing Exponential Change | PwC 7pwc.com/assetmanagement At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. For more information about the global asset & wealth management marketing programme, please contact Maya Bhatti on +44 (0) 20 7213 2302 or maya.bhatti@uk.pwc.com. © 2017 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
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