Wealth managers should expect lower assets under management this year and seize revenue opportunities – study

Although headwinds caused by geopolitics, the pandemic and the economy are likely to hurt assets this year, the Morgan Stanley and Oliver Wyman report said companies can thrive in multiple ways, such as capturing segment revenue. affluent/weak HNW masses, and proving that they can create value for customers more effectively than their competitors.

The war in Ukraine, high inflation, rising energy prices and supply chain disruptions caused by COVID-19 are likely to blunt growth in assets under management for the wealth sector this year – the first possible decline in a decade, report says.

The Morgan Stanley and Oliver Wyman Global Wealth & Asset Management report, It’s time to evolve, predicts growth of around 4% per year over the next five years to 2026, a slowdown from the 8% rate seen over the past five years (2016 to 2021). Such a result suggests that companies that have been buoyed by a decade of ultra-cheap credit and rising stocks will have to work harder to stay competitive.

Around 80% of the new wealth will come from Asia-Pacific and North America until 2026 (which also shows how relatively small the contribution from Western Europe is).

Even so, the report indicates that the growth rate gap between APAC and North America is narrowing.

The release comes at a time when several organizations, such as Capgemini and Boston Consulting Group, publish reports on global industry performance and issues (see BCG report here). The Capgemini report is due out this week. This news service also recently questioned whether the definitions of “high net worth” need to be changed because inflation erodes the value of money.

The prospect of lower private wealth assets under management for 2022 comes on top of corporate margins being squeezed by ultra-low/negative official interest and enthusiasm for asset management models low-margin “liabilities” such as exchange-traded funds. In this environment, large players with economies of scale have benefited, while smaller organizations have had to merge, outsource functions and forge alliances to mutualize costs. Customer demands for real-time digital engagement and more information have also increased costs.

“The pressure on small businesses and reservation centers has increased significantly, leading to increased consolidation and streamlining of the footprint, particularly in Europe where the lack of a true banking union still hampers an operating model and fully integrated financing in all markets. Given the cyclical headwinds and structural shifts described above, we anticipate that wealth managers‘ profit pools will be at risk unless there is a fundamental transformation in service and operating models,” indicates the report.

 

Dolores W. Simon