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Between investors and regulators, the pressure will be on mutual fund fees, driving them downward by nearly 20% by 2025.

In its report “Asset & Wealth Management Revolution: Pressure on Profitability,” PwC predicts that mutual fund asset-weighted fees will fall by 19.4%, from 0.44% in 2017 to 0.36% in 2025. Passive funds will experience the biggest decrease, of up to 20.6%, while active funds will see their fees fall by 19.3%.

The report says that asset managers need to consider four factors to make sure that they have a future-fit operating model as the industry changes: “value for money, finding a strategic positioning, understanding that technology is the key to future success and winning the battle for talent.”

“Based on our sample of 64 [asset and wealth managers] with over $40 trillion in assets under management they have been able to improve their margins by 15.91% since 2012, largely due to strong AUM growth and lower costs achieved through economies of scale,” Olwyn Alexander, Global Asset & Wealth Management leader for PwC, says in a statement.

Alexander adds, “However, going forward they will need to adapt their business models in the coming years in order to win in a new environment as fees continue to fall and improving or even maintaining operating margins will become much more challenging.”

Other key findings include an expected rise in assets to $145.4 trillion by 2025 and the largest drops in mutual fund management fees in Europe and Asia, to the tune of some 26% and 24.6%, respectively. The report also says that total expense ratios will drop even faster than management fees for the period in question, with investors “benefit[ing] greatly.”

Alternative fees have been a bit more resilient, but the report says that’s not likely to continue; it predicts that as fee innovations lead the sector to become more outcome-based, management fees will fall between 13.1% and 16.4% by 2025 depending on the asset class.

Developed markets will see the closure of up to 25% of all mutual funds as exchange-traded funds grow significantly, and the ratio of revenue to AUM of traditional asset managers is estimated to fall by 22.4% up to 2025. This is in spite of PwC’s prediction that AUM will rise to $145.4 trillion by 2025, the report says, indicating a sustained pressure on business models.