Three priorities for protecting asset and wealth management profitability

As volatility returns to financial markets, the asset and wealth management (AWM) industry stands at a cross roads. Falling fees and rising costs are squeezing profit margins. Tense markets are ratcheting up the pressure. It’s time to do things differently if profitability is to be protected and enhanced.

The results of our 2019 CEO Survey speak volumes. Just a third of AWM CEOs declare themselves ‘very confident’ about 2019’s revenue prospects, the lowest level in five years. Even so, the third stating they’re very confident is a significant minority, suggesting that they’re actively preparing their firms for a new era.

With savvy investors proving tough negotiators, PwC estimates that aggregate fees will fall by almost 20% by 2025. To thrive in the future, we believe that firms must raise productivity in three ways:

1.New views on technology

After a decade or more of specific and disparate technology investments, today’s successful firms are aggressively integrating technology and data onto single digital platforms. Complex uncoordinated IT systems have kept costs high and fostered inefficiency. By contrast, organizations with single platforms share data and information seamlessly; leverage market insights and customer feedback faster; and adopt emerging technologies and innovations quickly. Integrating knowledge about clients, markets and productivity within the firm creates a platform from which firms can thrive in today’s competitive market environment.

2. Agile M&A

While mergers and acquisitions have been on the rise in the last few years, fresh-thinking managers are more versatile. They’re achieving the benefits of M&A without the drawbacks, through either joint ventures, right-sourcing of back office arrangements to share economics or partial acquisitions which look more like private equity investments. Doing so can counter fee pressures through scale, with the additional benefits of acquiring skills in new asset classes and gaining distribution.

3. Nurturing 21st Century talent

New technologies are changing the skills that AWMs need, the way jobs and tasks are completed, and the very definition of talent. Managers are not only battling each other for the best people, but also challenging innovative new start-ups and large established technology companies. Are ‘gig’ economy specialists part of the answer? They can be leveraged for specific projects through emerging talent platforms. More broadly, what are you doing to better understand and monitor your workforce? Identifying ‘stars’ and laggards’ can help lift productivity.

For AWM firms, successfully evolving and adapting to a new era will depend not only on how artfully they manage new technology, M&A and talent, but also how they leverage developments in those areas to become more productive. Otherwise, as fees shrink some managers may find their cost bases unsustainable.

? 2019 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. This content is for general information purposes only, and should not be used as a substitute for consultation with a professional advisor.