Asset And Wealth Management—Embracing AI And Consolidation To Win



FORBES — The advice to asset managers has always been to focus on your strength—whether it be investing or distribution, for instance. Well, that is simply not enough anymore….

In today’s dynamic financial landscape, the asset and wealth management industries are undergoing a remarkable transformation. As technology advances, customer expectations evolve and fees further compress, with firms seeking new ways to adapt and thrive in the face of change.

AI combined with mergers and acquisitions are two predominate trends leading shifts in the asset and wealth management industries.

AI and technology advances driving change

As companies tool up for robo-advice and enhanced retail presence supported by smart use of AI, retail will have access to customized solutions once only reserved for ultra high net worth—a democratization of investment advice.

In their recent survey titled “Asset and Wealth Management Revolution 2023,” PWCPWC -0.6% discusses their research on HNW individuals in the US. Many are reconsidering their wealth management relationships as they seek customization and access to an increased variety of products and services—including private markets. Further, the opportunity for wealth management is immense—they expect $68 trillion of generational wealth transfer from baby boomers to millennials to take place by 2030, heightening the demand for the tech-enabled services favored by youngers.

PWC also predicts that assets managed by robo-advisers will reach $5.9 trillion by 2027, more than double the figure of $2.5 trillion in 2022 (see chart below). Evidencing the popularity of this trend, JP Morgan bought UK robo-adviser Nutmeg for $700 million in 2021.


 Robo-Advice PWC

Mergers and acquisitions trends

One emerging model for asset growth centers upon deeper vertical integration of the value chain—especially as asset and wealth management converge with the AI and other recent tech innovations. Goldman Sachs took a step in this direction last year when it announced it would internally unify its asset and wealth management areas back together under one business. Other companies have been turning to M&A to enable vertical integration, demonstrated by Schroders’ recent acquisition of Benchmark Capital.

Earlier this year in their report “M&A in Wealth and Asset Management: How Deals Will Shake Up the Industry,” Bain highlighted both scale and scope M&A trends to capture growth opportunities. While they expect to see a smaller share of “scale” deals valued at $1 billion or greater, they predict a significant increase in “scope” deals, especially those made to gain digital capabilities, expand offerings and ecosystems, and continue vertical integrations.

Between now and 2030, Bain expects continued scale activity for wealth management companies, heightened by technology. As the largest wealth managers outpace the market, scale benefits will become even more apparent since players will have to make significant investments in tech and data/analytics to provide differentiated client experiences. Bain reports that when a company shifts from a traditional to a digitally enabled wealth management model, returns to scale can be up to 35% higher (because of lower variable costs in a digitally enabled model). To complete that scale, companies can then turn to M&A for consolidation.

The PWC survey also highlights the trend around the consolidation of companies. Their global survey found that almost three-quarters of asset managers are considering acquiring or merging with a competitor, as business models come under increased pressure.

“The big managers are getting bigger,” said Olwyn Alexander, PwC’s global asset and wealth management leader. “There’s a lot of cost pressure in the industry now and margin pressure that’s forcing managers to look at their critical mass, and particularly with these pressures from the very big managers in the industry, whether they can withstand that as well as maintain margin.”

In conclusion, AI and consolidations are reshaping the asset and wealth management industries as firms seek cost efficiencies and strive for market competitiveness. We expect these trends to continue, driven by strategic objectives and evolving market dynamics.

Image by: Pexels



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Edmund Shing, PhD

Global Chief Investment Officer
BNP Paribas Wealth Management

Edmund has over 29 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris.  He previously held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London from 2015 to 2020, and has been Chief Investment Officer at BNP Paribas Wealth Management since November 2020.

Edmund is responsible for piloting our investment strategy and will continues to rollout out recommendations and themes with actionable advice that brings our expertise to our clients and support to our client-facing teams.  In this time of change, his expertise in following and anticipating markets is a true value added for both our customers and those at Wealth Management who serve them.

Edmund has a PhD in Cognitive and Computing Science from the University of Birmingham in the United Kingdom, and has done advanced studies in Knowledge-Based Systems and in Experimental Psychology.  He is an EFFAS-certified financial analyst. He has also authored the book “The Idle Investor” published by Harriman House in 2015, proposing 3 simple investment strategies that take only a few minutes to execute per month.

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