Asset, Wealth Management CEOs optimistic about growth prospects – PwC survey

The report of a survey on Asset and Wealth Management (AWM) CEOs by professional services firm PwC has found that while they remain confident about their companies’ growth prospects in 2018, concerns over disruption possible through regulation, technology and changing consumer behavior keeps them up at night.

Some of the key findings in the survey published in a report ‘Optimistic CEOs, buoyant growth, Disruption ahead’, part of PwC’s 21th Global Survey questioned 126 of the AWM sector’s CEOs about threats and opportunities facing them.

PwC found that 87% of AWM CEOs are confident about revenue growth in 2018 – slightly lower than in 2017 when 92% were this optimistic. 79%of AWM CEOs are gearing up for organic growth in the year ahead, compared with 76% in 2017. To prepare for this, 57% intend to increase headcount. AWM CEOs 3 biggest concerns are regulation (83%), tax changes (77%) and geopolitical uncertainty (80%) as top threats.

With fees under intense pressure in the largest markets of the US and Europe especially,39% of AWM CEOs intends to cut costs and almost three quarters (73%) of AWM CEOs are ‘somewhat or extremely concerned’ about cyber security threats. While 70% of AWM CEOs believe changes in core technologies will prove ‘disruptive or very disruptive’ over the next 5 years, just 38% believe that robotics and AI can improve the consumer experience

Although Assets under Management (AuM) will be buoyed by rising asset prices and PwC estimates that by 2025 global AuM will have almost doubled – rising from US$84.9 trillion in 2016 to US$145.4 trillion in 2025 – major changes to fees, products, distribution, regulation, technology and people skills, mean it won’t be business as usual in the years ahead.

Esiri Agbeyi, partner and Private Wealth Services leader, PwC Nigeria, says this is a time of contrasts: optimism, growth and looming disruption which of course can bring opportunities.

“Although optimism among CEOs is a strong characteristic of the Asset and Wealth Management sector, CEOs do realise that fast-emerging disruptions mean the sector must urgently learn new ways to differentiate their offerings, reach the market and gain scale. With barriers to global businesses likely to rise, digital technology is an important part of the answer.”

PwC found that more CEOs are gearing up for organic growth in the year ahead which may set off an era of mergers and acquisitions. Whether through M&A, joint ventures or straightforward expansion, CEOs remain eager to access markets outside their home base, the report says.

The reports says that CEOs are rightly anxious about the many threats they face. Regulation is their greatest worry, with 83% stating that they’re ‘somewhat or extremely concerned. In Europe and the US, the Markets in Financial Instruments Directive II (MiFID II) and Department of Labor Fiduciary Rule respectively are set to squeeze margins. These regulations are putting further pressure on asset management fees and demanding greater transparency.

Similarly, tax changes are a big issue, with 77% stating that they’re ‘somewhat or extremely concerned’. For some managers, new tax rules are challenging historic tax structures. More generally, the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) rules for sharing of tax information about individuals between countries places the burden of reporting on financial institutions. Additionally, the United States recently enacted the most comprehensive tax reform in more than 30 years and the implications for operating models in the AWM sector could be significant.

“To take advantage of the industry’s growth opportunities, firms need a clear strategy that highlights their differentiating capabilities and allocates budgets accordingly,’ said Agbeyi.

 

ISAAC ANYAOGU