The mutual fund industry is facing many of the same challenges confronting the financial advisory industry, requiring similar solutions, according to a new report from PwC.
Fees are under pressure, driving down revenues, clients are demanding more for their money, regulators are demanding more transparency and market appreciation is expected to slow,
The mutual fund industry “is at a critical juncture,” the report states. “Managers can no longer rely on AUM growth and market appreciation to sustain profits in the way that was possible in recent years.”
As a result, mutual fund AUM, which grew at an 8.7% annual rate between 2011 and 2018, is predicted to increase at a 5.6% annual rate over the next seven years, or roughly two-thirds as fast, according to PwC.
PwC also predicts that between 2018 and 2025, total expense ratios of funds will decline 22%, the net number of mutual funds and ETFs will fall 14% and the number of fund companies will decline 20% due to acquisitions and eliminations.