Disruption is coming for wealth and asset management, warn CEOs

Whilst optimistic about growth, finance leaders are aware of looming disruption.

Asset and Wealth Management CEOs remain ‘very confident’ about their companies’ future growth prospects for 2018 but believe a period of technological disruption is coming for the industry, according to a new report from PwC.

The report, ‘Optimistic CEOs, buoyant growth, disruption ahead’, which polled CEOs about the threats and opportunities facing their companies found that leaders in the industry believe the forces of regulation, technology and changing consumer behaviour are ushering in a period of disruption.

Nearly nine out of 10  - 87 per cent - of those polled said they are confident about revenue growth in 2018 – slightly lower than in 2017 when 92 per cent were this optimistic.

Just under three quarters (70 per cent) said changes in core technologies will prove ‘disruptive or very disruptive’ over the next five years but just 38 per cent believe that robotics and AI can improve the consumer experience.

CEOs’ three most cited concerns, however are over-regulation (83 per cent), geopolitical uncertainty (80 per cent) and tax changes (77 per cent).

PwC said that although Assets under Management (AUM) is likely to be buoyed by rising asset prices - it estimates that by 2025 global AUM will have almost doubled, rising from $84.9trn in 2016 to $145.4trn in 2025 – major changes to fees, products, distribution, regulation, technology and people skills, mean “it won’t be business as usual in the years to come,” the report stated.

Technology and the speed that it may change the sector is making CEOs lose sleep. As a consequence, many CEOs are also worried about the availability of digital talent. Some 63 per cent said they are ‘somewhat or extremely concerned’ about the lack of digital skills in senior leadership. A similar number, 67 per cent, are concerned about a lack of digital skills throughout their businesses.

Elizabeth Stone, UK asset and wealth management leader at PwC, says that despite an optimistic outlook asset and wealth management CEOs are beginning to appreciate the potential magnitude of change been ushered in by technological disruption.

“Artificial intelligence, robotics, big data and blockchain are all transforming the way asset and wealth managers work. Some firms are further ahead than others in exploring these, but all firms needs to ensure technology is front and centre of their business models, especially as barriers to global business are likely to continue to rise. It’s also important not to forget the uniquely important role of human talent in this industry. Finding and retaining the best people remains a key differentiator in a competitive market.”

London, Stone adds, is a global centre for investment management but that the spectre of hard Brexit should put firms on guard for a period of change beyond just technology.

“Firms should use Brexit as an opportunity to reassess their business models and strategy in light of the disruptors highlighted as a concern both in the CEO survey and our AWM 2025 report,” Stone said.