Four-fifths – or 80% - of asset and wealth management (AWM) firms say disruptive technologies such as artificial intelligence (AI) will fuel revenue growth, according to PwC’s asset and wealth management report for 2024.
About 84% of the 264 asset managers and 257 institutional investors interviewed say AI will improve operational efficiency while 72% noted that it will improve employee productivity. The participants came from 29 countries and territories.
Of those interviewed, 73% of these firms say AI is seen as the most transformational technology over the next two to three years.
The report, released on Nov 19, also finds that 81% of the firms are thinking of embarking on strategic partnerships, consolidations, or mergers and acquisitions in order to enhance technological capabilities. They are also looking to build an “extended tech ecosystem” to innovate, expand into new markets, and democratise access to investment products ahead of a great wealth transfer.
While the provision of tech-as-a-service by AWM organisations could deliver a 12% boost to revenues by 2028, according to PwC’s analysis, a smaller percentage – 68% - say that they allocate less than one-sixth of their capital to innovative and potentially transformative technologies. Over half – or 59% - of institutional investors note that such technologies could reduce their reliance on asset managers.
At present, only 20% of AWM firms are using disruptive tech to enhance personalised investment advisory, says PwC.
Under baseline projections, research by PwC estimates that global assets under management (AUM) held by asset and wealth managers is expected to hit US$171 trillion ($229.24 trillion) by 2028, representing a compound annual growth rate (CAGR) of 5.9% and up from 5% in 2023. Alternative assets are projected to grow much faster – at a CAGR of 6.7%, to reach $27.6 trillion by 2028.
“Disruptive technologies such as AI are transforming the asset and wealth management industry and fuelling 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,” says Albertha Charles, global asset & wealth management leader, PwC UK.
“To emerge as leaders in this new digital-first market, AWM 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,” Charles adds.
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Among alternatives, tokenisation stands out with tokenised products expected to increase to over $317 billion in 2028, up from $40 billion, representing a CAGR of 51%.
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%), says PwC.
“This year’s report underscores the urgent need for AWM players to rethink their value propositions as megatrends, from technological disruption to demographic shifts, reshape how and where customers will consume their financial services, and the financing of funding gaps tomorrow. Long-term success hinges on the continuous reinvention of how organisations create and deliver value at speed and scale,” says Paul Pak, Asia Pacific and Singapore asset and wealth management leader, PwC Singapore.
“Asia Pacific stands out as one of the fastest-growing regions, driven by a burgeoning middle class, rapidly expanding economies, and increasing wealth opportunities. The pace of digital adoption and innovation is accelerating across the region, with progressive strides being made in tokenisation and digital assets. This will accelerate the convergence between public and private markets, expand access to a wider suite of investment solutions for individuals, and enable greater personalisation,” he adds.
