One in six asset and wealth managers expected to disappear by 2027

Written by Adam Cadle

13/07/2023

One in six asset and wealth managers globally are expected to be swallowed up or fall by the wayside by 2027, twice the historical rate of turnover, according to PwC’s 2023 Global and Wealth Management Survey.

The report, based on PwC’s latest industry projections and a survey of 250 asset managers and 250 institutional investors, said the industry is grappling with a set of challenges including digital transformation, shifting investor expectations, consolidation and ‘retailisation’. As a result, 73% of asset managers are considering a strategic consolidation with another asset manager in the coming months in order to gain access to new segments, build market share and mitigate risks.

Firms are also turning to technology to transform, with more than 90% of asset managers already using disruptive technological tools to enhance investment performance. A direct consequence of these pressures – and the drive to deliver at scale amid cost and competitive pressures – is that by 2027, PwC expects the top ten largest asset managers to control around half of all mutual fund assets globally, up from 42.5% in 2020.

In 2022, global AuM for asset managers fell to US$115.1trn, nearly 10% below the 2021 high (US$127.5trn), and the greatest decline in a decade. The survey found that inflation, market volatility and interest rate movements are by far the biggest concerns for both investors and asset managers over the next 12 to 24 months. However, AuM are expected to rebound by 2027, reaching US$147.3trn (representing a compound annual growth rate of 5%).

PwC also revealed that nearly 40% of institutional investors are planning to invest in custom indexing products in the coming 12 to 24 months, whereas also half of asset managers expect to add individualised indexing solutions to their offering. By 2027, PwC said it expects direct indexed AuM to have more than tripled to US$1.47trn, roughly 1% of total AuM, while active ETFs are forecasted to rise from US$4.6bn to US$1.1trn – accounting for 7.5% of the global ETF market by 2027.

PwC Ireland, global asset & wealth management leader, Olwyn Alexander, said: “Existential challenges are sweeping the asset and wealth management industry against a backdrop of social, economic and geopolitical disruption. The choice is simple – adapt to the new context or fail. Firms that effectively leverage technology such as generative AI and robo-advisors, build meaningful inroads to new and existing customers, diversify their recruitment, and deliver exceptional client experiences will be well-positioned to not only survive, but thrive.”

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