Artificial intelligence changing wealth management industry
Disruptive technologies such as AI are transforming the asset and wealth management industry and fuelling revenue growth, productivity and efficiency. Almost three-fourths (73%) of asset and wealth management organisations say AI is the most transformational technology over the next 2-3 years, a report by consultancy PwC shows.
81% of wealth managers are contemplating strategic partnerships, consolidations, or mergers and acquisitions (M&A) to enhance technological capabilities and build an ‘extended tech ecosystem’.
Key findings:
- – Global assets under management (AUM) are projected to hit US$171 trillion by 2028 at a 5.9% compound annual growth rate (CAGR), with alternatives to grow quicker – at 6.7% CAGR, to reach $27.6 trillion by 2028.
- – Wealth management organisations look to tokenisation to democratise finance: Tokenised investment funds are expected to surge to over $317 billion in 2028, at a 51% CAGR.
- – 73% of asset managers considering M&A to get skilled expertise as the number one driver of deal-making over next 2-3 years. 30% say they lack relevant skills and talent.
The survey comprises 264 asset managers and 257 institutional investors from across 28 countries and territories.
“Disruptive technologies such as AI are transforming the asset and wealth management industry and fuelling revenue growth, productivity and efficiency”, says Albertha Charles, Global Asset & Wealth Management Leader, PwC UK.
“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, 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.”
AWM organisations broadly see disruptive technologies such as AI as transformational, with almost three-fourths (73%) viewing it as the most transformative technology over the next two to three years.
80% say such technologies will fuel revenue growth, with 84% noting it will improve operational efficiency and 72% noting it will improve employee productivity. The provision of tech-as-a-service1 by wealth management organisations could deliver a 12% boost to revenues by 2028, according to PwC analysis.
The report says that only 20% of wealth management organisations are currently using disruptive tech to enhance personalised investment advisory.
Tokenised products are expected to increase from $40 billion to over $317 billion in 2028, representing a 51% CAGR.
“Tokenisation, or fractional ownership, could expand market offerings by democratising finance and lowering premiums, with tokenisation planned to be offered notably by asset managers in private equity (53%), equity (46%), and hedge funds (44%)”, the report says.
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