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Asset and Wealth Management

Wealth management is at the core of the financial services landscape. Yet many wealth managers struggle to maintain their top-line margins despite strong growth globally in personal financial wealth and in their own organizations' level of assets under management. They can help reverse this trend, and strengthen their competitive positions, both by using advanced analytics to better address clients’ individual needs and by adopting smart revenue practices.

Overall, global personal financial wealth grew by 12% in 2017 to $201.9 trillion in US dollar terms. This expansion more than doubled that of the previous year, when global wealth rose by 4%, and represented the strongest annual growth rate in the past five years in dollar terms. The main drivers were the bull market environment in all major economies—with wealth in equities and investment funds showing by far the strongest growth—and the significant strengthening of most major currencies against the dollar. In general, developed markets held a higher share of wealth in non-investable assets—particularly pension fund entitlements—than developing markets. The share of global wealth held by millionaires increased to almost 50% in 2017, compared with just under 45% in 2012. If recent patterns of wealth expansion continue, under an optimistic scenario, personal financial wealth could rise at a compound annual growth rate of around 7% from 2017 to 2022 in US dollar terms.

Ultimately, wealth managers need to grasp that delivering standardized experiences to clients will no longer suffice. Although many institutions have begun to invest in personalization, many still find it difficult to effectively combine an enhanced client experience with the underlying management of data, processes, organization, skills, governance, and behavioral change. Wealth managers that do not take the necessary steps in these areas run a high risk of being left behind.

In Asset Management, a Call for Innovation

The global asset management industry faces growing challenges that were confirmed by its performance in 2016. For the first time since the 2007-2008 financial crisis, the revenue and profit pools of traditional managers fell worldwide. Moreover, margins contracted as pressure on managers’ fees continued to rise. Investment outflows from traditional active products persisted. Amid such a difficult environment, which steps should asset managers take to achieve a sustainable, positive trajectory?

There are five opportunities for asset managers to make significant gains while coping with their industry’s difficult and shifting environment:

  • Innovation and excellence in managing the overall business portfolio
  • Adoption of advanced data and decision-making technologies
  • Structural cost management
  • Gaining entry to the Chinese market and other pockets of fast growth
  • Strategic M&A to achieve a winning business model

Success in the future will require asset managers to identify opportunities, move boldly, and transform the very way they work. Firms that lack a sustainable source of advantage will struggle to survive.

Financial Institutions
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