Asset and wealth management chief executives are very confident about their firms’ growth prospects this year, but are also aware that a period of disruption lies ahead, PwC reported Tuesday.
The report was based on questions put to 126 asset and wealth management chief executives about the opportunities and threats facing their operations as part of PwC’s 21st Global CEO Survey.
Eighty-seven percent of survey respondents expressed confidence about revenue growth in 2018, five percentage points lower than in last year’s survey.
PwC estimated that by 2025, global assets under management, buoyed by rising asset prices, will have nearly doubled, rising from $84.9 trillion in 2016 to $145.4 trillion.
However, major changes to fees, products, distribution, regulation, technology and people skills mean it will not be business as usual in the years to come.
Heads of asset and wealth management firms are rightly anxious about the many threats they face — and rightly so, according to PwC.
Regulation is their greatest worry, with 83% saying that they were “somewhat or extremely concerned.” In the U.S., the Labor Department’s fiduciary rule is set to squeeze margins, as is the Markets in Financial Instruments Directive II in Europe.
These regulations are exerting more pressure on asset management fees and demanding greater transparency, the report said.
But technology and the speed at which it may change the sector is perhaps the main culprit causing chief executives in the survey to lose sleep. Seven in 10 believed that changes in core technologies would prove disruptive or very disruptive over the next five years.
As a consequence, 63% expressed some or great concern about the lack of digital skills in senior leadership, and 67% worried about a lack of digital skills throughout their businesses.
At the same time, the leaders of wealth and asset management firms are struggling to come to grips with how technology is changing consumer behavior. “Simply speaking, customers want better products and services, more quickly and at a lower cost (better, faster, cheaper),” the report said.
However, only 38% of survey respondents believed that robotics and artificial intelligence could improve the consumer experience. PwC noted that this appeared to be a very low number, especially given that AI may come to reduce or eliminate completely the use of the investment analyst.
Another big issue for chief executives in the survey was tax changes, with 77% indicating at least some concern. New tax rules are challenging historic tax structures for some managers, according to the report.
More generally, the Foreign Account Tax Compliance Act and Common Reporting Standard rules for sharing of tax information about individuals between countries places the burden of reporting on financial institutions.