Some 81% of wealth management firms are considering strategic partnerships, consolidations, or mergers and acquisitions (M&A) as a means to expand their offerings, according to a new report by PwC.
The 521 asset managers and institutional investors it surveyed largely agreed that this was necessary to expand into new markets and promote investment products ahead of the great wealth transfer.
Yet most highlighted the need to enhance their technological capabilities as a primary motive for consolidatory or M&A activity.
Almost three-quarters (73%) of respondents said artificial intelligence will be the most transformational change for the asset management industry over the next two to three years, and they want to be at the leading edge of this trend.
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Most (80%) of those surveyed said such technology will fuel revenue growth, with 84% saying it will improve operational efficiency, and 72% anticipating it to improve employee productivity.
PwC’s global asset and wealth management leader Albertha Charles said: “Disruptive technologies such as AI are transforming the asset and wealth management industry and fueling revenue growth, productivity and efficiency.
“Market players are subsequently looking to strategic consolidation and partnerships to build tech-driven ecosystems, break down silos in data management, and transform their service offerings ahead of a great wealth transfer that will see mass affluents and younger audiences play a greater role in shaping service demands.”
Adopting new technologies may be crucial to staying ahead in wealth management – with PwC forecasting a 12% boost to revenues by 2028 – but many firms lack the necessary skills to do so.
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Almost a third (30%) of asset managers currently lack the relevant talent in their workforce, so 73% of organisations said they are exploring M&A as means access skilled expertise in this regard.
Charles said there is an “urgent need for organisations to rethink investment strategies” in the face of revolutionary new technology.
“Strategic partnerships and consolidation will play a vital role in building tech ecosystems that will facilitate a greater transfer of ideas and expertise,” he added.
“Smaller players will be able to bring their systems up to speed quickly and cost-effectively, while allowing larger players to access talent and insight pivotal to growth, particularly as new and emerging technologies such as AI transform the investment management landscape.”
