Money managers must rethink how they compete for business in a world where disruptive technology is impacting their value propositions, a survey said.
PwC’s 2024 Asset and Wealth Management survey asked 257 institutional investors whether they believe that disruptive technology, such as generative artificial intelligence and big data, could make it easier to access investments and therefore reduce their reliance on money managers.
Among those pension funds, insurance companies, endowments and family offices, 59% responded ‘yes,’ adding that 60% also hold regular discussions with their providers on how technological innovations are incorporated into investment strategies, the survey said.
Institutional investors are beginning to expect tech-enhanced capabilities from their managers, such as data-enabled insights, adaptability and customization, PwC said.
But they’re also upping their own capabilities, investing in disruptive technology to help them in real-time risk monitoring, advanced market trend forecasting, and efficient portfolio rebalancing, the report said.
The survey found that 80% of 264 surveyed asset and wealth managers think AI will fuel revenue growth, while 81% are considering strategic partnerships, consolidation or mergers and acquisition to enhance their technological capabilities.
PwC’s baseline scenario is that global assets under management hit $171.3 trillion by 2028, up from $128.9 trillion in 2023. The forecast growth represents a compound annual growth rate of 5.9%, up from 5% in last year’s analysis.
Alternatives AUM, however, is expected to grow at a faster rate than total assets, at a CAGR of 6.7%, reaching $27.6 trillion by 2028, up from $19.9 trillion in 2023.
“Interest in private markets is accelerating the creation of multi-asset managers, and driving a step up in the acquisition of infrastructure, private credit and other potentially high-margin businesses,” the report said.
PwC made four recommendations to money managers based on the findings of its survey. The first is that managers make technology a “value creator,” noting that the largest asset and wealth managers are “becoming tech and data firms in their own right.”
Advances in technology and data are opening up innovative new value propositions and “sharpening competitive relevance in a market that is now growing faster than we anticipated last year.”
Managers need to be innovative when it comes to new offerings, look at expanding into private markets and engaging with mass-affluent clients, and break down silos in data management.
Firms should also look at adding strategic partnerships; the management of their talent and skills; and enhancing visibility, bolstering protection, and prioritizing cybersecurity across the organization, PwC said.
"The report highlights an urgent need for AWM organizations to rethink investment strategies,” Albertha Charles, global asset and wealth management leader for PwC U.K., said in a news release accompanying the report.
“Long-term viability depends on a radical, fundamental and continuous reinvention of how organizations 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.”
