Eight in 10 (80 per cent) asset and wealth managers expect disruptive technologies, such as AI, to fuel revenue growth, with those moving quickly to adopt ‘tech-as-a-service’ seeing a potential 12 per cent boost to revenues by 2028, according to analysis from PwC.

Its 2024 Asset & Wealth Management Report also found that 81 per cent were considering strategic partnerships, consolidations, or mergers and acquisitions (M&A) to enhance technological capabilities and build an ‘extended tech ecosystem’ to innovate, expand into new markets, and democratise access to investment products ahead of a great wealth transfer.

The majority of asset and wealth managers saw disruptive technologies as ‘transformational’, with 73 per cent viewing AI as the most transformative technology over the next two to three years.

More than four fifths (84 per cent) felt it would improve operational efficiency and 72 per cent said it would enhance employee productivity.

PwC stated that while such technologies represented an opportunity to ‘turbo-charge’ operations and access to new markets, 68 per cent of asset and wealth managers allocated less than a sixth of their capital to innovative technologies.

It also found that only 20 per cent of asset and wealth management organisations were currently using disruptive technologies to enhance personalised investment advisory.

Under baseline projections, PwC estimated that global assets under management (AUM) held by wealth and asset managers will hit $171trn by 2028 at a 5.9 per cent compound annual growth rate (CAGR), with alternatives projected grow quicker at 6.7 per cent CAGR to reach $27.6trn over the same period.

While PwC said that alternatives represented a “significant growth opportunity”, only 18 per cent currently offered emerging asset classes as part of their offering, even as 80 per cent that do offer such assets report a rise in inflows.

Against this backdrop, 30 per cent of asset managers felt they lacked relevant skills and talent, while 73 per cent of asset and wealth management organisations who were exploring M&As saw access to skills expertise as the primary driver for deal making over the next two to three years.

“Disruptive technologies such as AI are transforming the asset and wealth management industry and fuelling revenue growth, productivity and efficiency,” said PwC UK global asset and wealth management leader, Albertha Charles.

“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.

“To emerge as leaders in this new digital-first market, asset and wealth management organisations must invest in their technological transformation while also ensuring they are re-skilling and upskilling their workforces with the necessary digital capabilities to remain competitive and innovative.

“The report highlights an urgent need for asset and wealth management organisations to rethink investment strategies. Long-term viability depends on a radical, fundamental and continuous reinvention of how organisations create and deliver value.

“Strategic partnerships and consolidation will play a vital role in building tech ecosystems that will facilitate a greater transfer of ideas and expertise.

“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.”

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