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The wealth management industry faces a dramatic consolidation over the next four years, with market volatility, high interest rates and fee pressure combined to see 1 in 6 companies disappear.
A PwC survey of 500 asset managers and institutional investors found that 16% of existing asset managers and asset managers will either go out of business or be acquired by a larger group by 2027. .
The global survey also found that nearly three-quarters of asset managers are considering acquiring or merging with competitors as their business models are under pressure in challenging market conditions.
“The big managers are getting bigger and bigger,” said Olwyn Alexander, head of global wealth and wealth management at PwC.
“There is a lot of cost pressure and margin pressure in the industry right now, and it is forcing management to consider their critical mass, and with that pressure, especially from the big management in the industry, margins are going down. We need to consider whether it can be tolerated while maintaining
The outlook is bleak as fund managers reel from the biggest loss of assets in a decade.
PwC research finds asset managers’ total assets under management to rise from a record high of $127.5 trillion to $115.1 trillion in 2021-2022 as market declines across asset classes hit management fees and performance fees. 10% down to the dollar.
Managers cited inflation, market volatility and interest rates as factors for the decline, with just under half expecting their assets under management to be further hit by environmental risks and geopolitics.
The global wealth management industry is responding to these pressures by rapidly closing deals, conducting a number of high-profile mergers and acquisitions, and seeking new customers and areas of growth.
Last month, California-based Franklin Templeton agreed to buy Asset manager Putnam Investments continues to expand into alternative products and retirement plans, trading with rival Putnam Investments for more than $1 billion.
Toronto-based Brookfield Asset Management, which manages $834 billion in assets, predicted in May that the tough economic environment would force a consolidation of asset managers. “Up to 10 major industry players”.
We see a similar trend in wealth management. In April, asset manager Rathbone paid rival Investec Wealth & Investments £839m to create a company with more than £100bn of assets under management.
“I think we will end up with one of the few UK asset managers with over £100bn under management,” said the chief executive of Evelyn Partners, a money manager that also acquired smaller advisors earlier this year. Chris Woodhouse told the paper. Financial Times last month.
PwC also expects the top 10 traditional asset managers to control half of all assets going to mutual funds by 2027, up from 42.5% in 2020.
Additionally, PwC predicts that robo-advice, which uses algorithms to deliver financial services, will grow to manage $6 trillion by 2027 as it provides low-cost, personalized advice. In 2021, JP Morgan acquired UK robo-advisor Nutmeg at $700 million.
The survey found that 90% of executives believe disruptive technologies such as generative AI and blockchain will boost profits and attract younger investors, with young investors increasing by 68 trillion from the previous generation. Its importance is expected to grow further as it inherits the dollar, PwC said.
Fees for active and passive investment funds have already fallen by a fifth to a quarter from 2017 to 2022, but will be further reduced in favor of larger firms whose size can absorb lower fees. is expected.
PwC’s Alexander said: “There’s real competition in terms of attracting assets under management, which puts a lot of new pressure on fees from a competitive perspective. Many say it benefits investors. ‘ said.
https://www.ft.com/content/24ca8149-816e-4263-816b-30be7ea52c0c PwC says 1 in 6 asset management groups will disappear by 2027