OliverWyman – The AI Tipping Point

The asset and wealth management industries are facing a long-term shift in the macroeconomic environment, even with the market rebound in 2023. The period of low inflation and strong markets that followed the Global Financial Crisis has been disrupted, mainly due to central banks raising interest rates to control inflation. This, combined with protectionism, nationalism, and geopolitical instability, is expected to impact global growth and wealth creation. In terms of the asset management industry, there is a tempered outlook. Total externally managed assets are projected to grow at a rate of 7% from 2022 to 2027, driven by private markets. Core active strategies are expected to lose market share to passive strategies, while the growth in money markets is expected to slow. Fee compression is also expected to continue, mainly in traditional asset classes, but at a moderated pace. Industry revenue is projected to grow at a slightly slower pace of 5.2%. In the wealth management industry, global household financial wealth is forecasted to grow at 6% from 2022 to 2027, led by the Asia-Pacific region, Middle East, and the ultra-high net worth individual segment. However, the industry is facing challenges in a more difficult market environment, with drops in assets under management, loan volumes, and transaction volumes. Despite these challenges, the asset and wealth management industries are expected to remain profitable and generate attractive returns on equity. However, the combination of lower growth and rising costs highlights the fragility of their operating model. Leading asset and wealth managers are embracing these challenges and using them to reexamine their strategies, reimagine their operating models, and adopt new capabilities like generative artificial intelligence to drive value and build resilience in their businesses. In order to drive profitable growth and operational resilience, asset managers need to invest in faster-growing areas and take specific actions. The leaders will be those who position their businesses strategically and take steps to drive growth and build resilience.