Four-fifths (80%) of asset and wealth management (AWM) organisations say disruptive technologies such as AI will fuel revenue growth, with those moving quickly to adopt 'tech-as-a-service' potentially seeing a 12% boost to revenues by 2028, according to PwC analysis.
PwC's 2024 Asset & Wealth Management Report, released today, surveyed 264 asset managers and 257 institutional investors from across 28 countries and territories, and also finds that four-fifths (81%) are contemplating strategic partnerships, consolidations, or mergers and acquisitions in order to enhance technological capabilities and build an 'extended tech ecosystem' to innovate, expand into new markets, and democratise access to investment products ahead of a great wealth transfer.
The report also finds that global AUM held by AWM organisations around the world is projected by PwC to hit US$171 trillion by 2028, with tokenised investment funds to surge at a CAGR of 51%.
Albertha Charles, Global Asset & Wealth Management Leader, PwC UK, said:
"Disruptive technologies such as AI are transforming the asset and wealth management industry and fuelling revenue growth, productivity and efficiency. Market players are subsequently looking to strategic consolidation and partnerships to build tech-driven ecosystems, break down silos in data management, and transform their service offerings ahead of a great wealth transfer that will see mass affluents and younger audiences play a greater role in shaping service demands. To emerge as leaders in this new digital-first market, AWM organisations must invest in their technological transformation while also ensuring they are re-skilling and upskilling their workforces with the necessary digital capabilities to remain competitive and innovative."
Disruptive technologies will fuel AWM revenue growth
AWM organisations broadly see disruptive technologies such as AI as transformational, with almost three-fourths (73%) viewing it as the most transformative technology over the next two to three years. 80% say such technologies will fuel revenue growth, with 84% noting it will improve operational efficiency and 72% noting it will improve employee productivity. The provision of tech-as-a-service1 by AMW organisations could deliver a 12% boost to revenues by 2028, according to PwC analysis.
While such technologies represent an opportunity to turbo-charge operations and access new markets, more than three-fifths (68%) say that they allocate less than one-sixth of their capital to innovative and potentially transformative technologies, with more than half (59%) of institutional investors noting such technologies could reduce their reliance on asset managers. This comes as only 20% of AWM organisations are currently using disruptive tech to enhance personalised investment advisory.
Global AUM to hit US$171 trillion by 2028, with alternatives leading the way
Under baseline projections, PwC research estimates global assets under management (AUM) held by asset and wealth managers (AWMs) is expected to hit US$171 trillion by 2028, reflecting a 5.9% CAGR, and up from 5% last year. Alternatives are projected to grow much faster - at a CAGR of 6.7%, to reach $27.6 trillion by 2028.
As AWM organisations look to new growth opportunities, tokenisation stands out, with tokenised investment funds expected by PwC to increase from $40 billion to over $317 billion in 2028, representing a 51% CAGR. Tokenisation, or fractional ownership,2 could expand market offerings by democratising finance and lowering premiums, with tokenisation planned to be offered notably by asset managers in private equity (53%), equity (46%), and hedge funds (44%). While alternatives represent a significant growth opportunity, less than one-fifth (18%) currently offer emerging asset classes such as digital assets as part of their offering - even as eight in ten that do offer such assets report a rise in inflows.
AWM looks to consolidation and tech ecosystems as talent remains top priority
Against this backdrop, 30% of asset managers say they are currently facing a lack of relevant skills and talent, while 73% of AWM organisations who are exploring M&A see access to skilled expertise as the number one driver for deal-making over the next 2-3 years. As AWM organisations contend with digital disruption and expanding their talent and product pools, more than four-fifths (81%) are contemplating strategic partnerships, consolidations, or mergers and acquisitions to build an extended tech ecosystem to drive growth.
Albertha Charles, Global Asset & Wealth Management Leader, PwC UK, concludes:
"The report highlights an urgent need for AWM organisations to rethink investment strategies. Long-term viability depends on a radical, fundamental and continuous reinvention of how organisations create and deliver value. Strategic partnerships and consolidation will play a vital role in building tech ecosystems that will facilitate a greater transfer of ideas and expertise. Smaller players will be able to bring their systems up to speed quickly and cost-effectively, while allowing larger players to access talent and insight pivotal to growth, particularly as new and emerging technologies such as AI transform the investment management landscape."
About PwC 2024 Asset & Wealth Management Report
PwC's 2024 Asset & Wealth Management Report is an international survey of 264 asset managers and 257 institutional investors from across 28 countries and territories. Respondents covered a broad spectrum of AUM size, with more than half boasting assets of over US$10 billion.