Clients saving more for retirement will cause global assets under management to soar by 2020, PwC has predicted.
Retirees will help increase European assets under management to $28tn (£17tn) and, combined with the rise of a new global rich, will push global AUM up from $64tn to $102tn.
This will pave the way for a new breed of “mega-managers”, the consultancy said.
The growth reflects an expected decline of banks and insurance companies due to regulatory costs. Instead, PwC expects large, globalised asset managers to take centre stage.
PwC Asset Management 2020 leader Rob Mellor said the industry stands on the precipice of fundamental change: “The coming years will bring the industry higher volumes of assets than ever before, which places more responsibility on firms to manage these assets to the best of their collective ability.
“Asset managers must clearly outline the value they bring to customers while being fully transparent over fees and costs.”
Agieng baby boomers will require wealth managers to deal with decumulation rather than accumulation of wealth, the report noted, as well as transferring wealth to a younger generation. According to its forecast, the compound annual growth rate (CAGR) for assets under management in Europe will be 4.4% over the next six years.
On a global level, PwC expects the increase of wealthy consumers and high net worth individuals from emerging economies to fuel the growth, as well as a worldwide shift to defined contribution (DC) pension schemes.
Partly as a result of this, it said asset managers will have to compete on a global level to succeed: “Some of today’s large global managers will become mega-managers, with a foot in all geographies and channels.”
However, the report warned technology companies with strong brands may disrupt the existing industry: “A social media firm such as Facebook or Twitter could, for example, provide distribution services, and partner with a bank or buy a back-office servicing firm to create an integrated asset management structure.”
Platforms will continue to grow in size, it argued, while the use of passive funds will also increase. Technology such as cloud computing will be employed by firms to better understand their customers and align products, pricing, risk and financial data.
