PwC, the firm providing professional services across audit and assurance, advisory and tax, has published a new report revealing that many firms believe the secret to higher revenues in just a few years lies with tech-as-a-service.
PwC’s 2024 Asset & Wealth Management Report surveyed 264 asset managers and 257 institutional investors from across 28 countries and territories. It found that 80 per cent of asset and wealth management (AWM) firms say AI and other disruptive tech will fuel revenue growth.
The report also revealed that 81 per cent are contemplating strategic partnerships, consolidations, or mergers and acquisitions in order to enhance technological capabilities and build an ‘extended tech ecosystem’. In doing so, they hope to boost innovation, expand into new markets, and democratise access to investment products ahead of a great wealth transfer.
AWM organisations broadly see disruptive technologies such as AI as transformational, with almost three-fourths (73 per cent) viewing it as the most transformative technology over the next two to three years. Eighty per cent say such technologies will fuel revenue growth.
A further 84 per cent note it will improve operational efficiency and 72 per cent say it will improve employee productivity. The provision of tech-as-a-service by AMW organisations could deliver a 12 per cent 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 per cent) say that they allocate less than one-sixth of their capital to innovative and potentially transformative technologies, with more than half (59 per cent) of institutional investors noting such technologies could reduce their reliance on asset managers. This comes as only 20 per cent of AWM organisations are currently using disruptive tech to enhance personalised investment advisory.
Investing in technological transformation
Albertha Charles, global asset and 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.”
Assets under management
Under baseline projections, PwC research estimates global assets under management (AUM) held by asset and wealth managers (AWMs) is expected to hit $171trillion by 2028, reflecting a 5.9 per cent CAGR, and up from five per cent last year. Alternatives are projected to grow much faster – at a CAGR of 6.7 per cent, to reach $27.6trillion by 2028.
As AWM organisations look to new growth opportunities, tokenisation stands out, with tokenised investment funds expected by PwC to increase from $40billion to over $317billion in 2028, representing a 51 per cent CAGR.
Tokenisation, or fractional ownership, could expand market offerings by democratising finance and lowering premiums, with tokenisation planned to be offered notably by asset managers in private equity (53 per cent), equity (46 per cent), and hedge funds (44 per cent).
Meanwhile, alternatives represent a significant growth opportunity. Less than one-fifth (18 per cent) currently offer emerging asset classes such as digital assets as part of their offering. However, the eight in 10 that do offer such assets report a rise in inflows.
Acquiring talent
Against this backdrop, 30 per cent of asset managers say they are currently facing a lack of relevant skills and talent. Meanwhile, 73 per cent of AWM organisations who are exploring M&A see access to skilled expertise as the number one driver for deal-making over the next two to three years.
As AWM organisations contend with digital disruption and expand their talent and product pools, more than four-fifths (81 per cent) are contemplating strategic partnerships, consolidations, or mergers and acquisitions to build an extended tech ecosystem to drive growth.
Charles 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.”
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