Asset managers see growth, disruption ahead
Asset and wealth management CEOs are very confident about growth prospects in 2018, but are expecting disruption for their industry from regulation, technology and changing consumer behaviour.
That’s the main conclusion from the PwC report “Optimistic CEOs, buoyant growth, disruption ahead”, which questions 126 of the AWM sector’s CEOs about the threats and opportunities facing their companies.
Bermuda has a significant AWM industry, boasting 543 investment funds with a net asset value of $161.5 billion as of the end of last year, according to the Bermuda Monetary Authority’s latest figures. The island is also a major provider of trusts to wealthy clients.
A full 87 per cent of AWM CEOs are confident about revenue growth in 2018, down slightly from 2017’s 92 per cent, while 57 per cent intend to increase headcount.
Respondents’ three biggest concerns were overregulation (83 per cent), geopolitical uncertainty (80 per cent) and tax changes (77 per cent), while almost three-quarters of AWM CEOs are concerned about cybersecurity threats.
While 70 per cent of AWM CEOs believe changes in core technologies will prove disruptive over the next five years, just 38 per cent believe that robotics and artificial intelligence can improve the consumer experience.
Scott Watson-Brown, PwC Bermuda’s asset and wealth management leader, said: “Asset and wealth management CEOs are struggling to come to grips with how technology is changing consumer behaviour.
“Simply speaking, customers want better products and services, more quickly and at a lower cost.
“However, just 38 per cent of the interviewed CEOs believe that robotics and AI can improve the consumer experience. This seems a very low number and hard to reconcile with the possibility that AI may come to reduce or eliminate completely roles such as the investment analyst.
“Artificial intelligence, robotics, big data and blockchain are all transforming the way asset and wealth managers work. All of this will have an impact on the role humans play in delivering success.”
PwC expects the industry to grow, buoyed by rising asset prices, so that by 2025 assets under management will have almost doubled from $84.9 trillion in 2016 to $145.4 trillion in 2025.
However, regulatory demands for greater transparency and tax law changes will add to the pressure on asset managers.
Scott Slater, PwC Bermuda tax services partner, said: “For some asset managers, new tax rules are challenging historic tax structures.
“With the Foreign Account Tax Compliance Act and Common Reporting Standard, the rules for sharing of tax information about individuals between countries places the burden of reporting on financial institutions.”
Mergers and acquisitions in the industry reportedly reached an eight-year high in 2017, and CEOs indicated the consolidation would continue. Forty-three per cent of those surveyed are planning M&A in 2018, while 48 per cent intend to expand capabilities through either strategic alliances or joint ventures.
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