Key to Success: Embracing New Talent and Technology in the Asset and Wealth Management Industry

PwC’s 2024 Asset & Wealth Management (AWM) Report, based on surveys of 264 asset managers and 257 institutional investors across 28 countries, reveals a strong consensus on the impact of AI and disruptive technologies on the industry’s growth trajectory. According to the report, 80% of AWM firms believe that AI and similar innovations will play a central role in driving future revenue growth.

Strategic Partnerships and Technological Advancements

In response to the rapid technological transformation, 81% of AWM firms are considering strategic alliances, consolidations, and mergers and acquisitions to strengthen their technological capabilities and create an integrated tech ecosystem. These partnerships are seen as essential for fostering innovation, penetrating new markets, and democratizing access to investment products, especially in anticipation of the impending wealth transfer.

The report shows that nearly three-quarters (73%) of AWM organizations view AI as the most transformative technology over the next two to three years, with 80% seeing it as a key driver of revenue growth. Additionally, 84% anticipate significant improvements in operational efficiency, while 72% expect a boost in employee productivity.

PwC’s analysis further highlights that offering technology as a service could lead to a 12% increase in revenues by 2028. However, despite these potential benefits, 68% of firms allocate less than one-sixth of their capital to innovative technologies, with 59% of institutional investors noting that such technologies could reduce their reliance on asset managers. Notably, only 20% of AWM firms are leveraging disruptive technologies to enhance personalized investment advisory services.

The Importance of Technological Investment

Albertha Charles, Global Asset and Wealth Management Leader at PwC UK, comments, “Disruptive technologies like AI are reshaping the asset and wealth management industry, driving growth, efficiency, and productivity.” She emphasizes the need for AWM firms to focus on building technology-driven ecosystems through strategic partnerships. These alliances help break down data management silos, enhance service offerings, and prepare for the upcoming wealth transfer, which will see younger, more tech-savvy investors shaping market demands.

“To remain competitive in this digital-first landscape, AWM organizations must prioritize technological transformation and invest in the digital capabilities of their workforce through upskilling and reskilling,” Charles adds.

Forecast for Assets Under Management (AUM)

PwC’s projections estimate that global assets under management (AUM) will grow to $171 trillion by 2028, with a compound annual growth rate (CAGR) of 5.9%. Alternative assets are expected to grow at a faster pace, with a projected CAGR of 6.7%, reaching $27.6 trillion by 2028.

Tokenisation, particularly fractional ownership of assets, is highlighted as a key growth opportunity. PwC predicts tokenised investment funds will grow from $40 billion to over $317 billion by 2028, representing a 51% CAGR. Tokenisation is expected to democratize finance by lowering premiums and expanding market access, with private equity (53%), equity (46%), and hedge funds (44%) leading the charge.

While less than 20% of AWM firms currently offer emerging asset classes like digital assets, 80% of those that do report increased inflows, indicating strong market interest.

Talent Acquisition and Development

The report also highlights the ongoing challenge of talent acquisition. Thirty percent of asset managers report a shortage of skilled expertise, and 73% of firms considering mergers and acquisitions cite access to talent as the primary driver for such deals in the next few years.

As digital disruption reshapes the industry, 81% of AWM organizations are actively pursuing partnerships or acquisitions to build a more robust tech ecosystem, driving growth and ensuring their competitive edge.

The Need for Strategic Reinvestment

Charles concludes, “The report underscores the urgent need for AWM firms to reassess their investment strategies. To secure long-term success, firms must continuously reinvent how they create and deliver value. Strategic partnerships and consolidations are crucial for building tech ecosystems that will facilitate knowledge transfer and expertise exchange.”

She adds that smaller players can quickly scale their operations while benefiting from the insight and talent of larger firms, particularly as AI and other emerging technologies reshape the asset management landscape.

This transformation calls for a renewed focus on technological advancement, strategic alliances, and talent development as AWM organizations adapt to a rapidly evolving market.