Unleashing the Power of AI and Consolidation in Asset and Wealth Management

**AI and Technology Advances Driving Change in Asset and Wealth Management**

The asset and wealth management industries are experiencing significant transformations in today’s dynamic financial landscape. As technology continues to advance, customer expectations evolve, and fees compress, firms are seeking new ways to adapt and thrive in the face of change.

AI and technology advances are driving these changes and reshaping the industry. With the rise of robo-advice and the smart use of AI, retail investors now have access to customized investment solutions that were previously only available to ultra high net worth individuals. This shift represents a democratization of investment advice.

According to a survey by PwC, HNW individuals in the US are reconsidering their wealth management relationships and seeking customization and access to a wider variety of products and services, including private markets. Additionally, the demand for tech-enabled services favored by younger generations is expected to surge, as the transfer of $68 trillion of generational wealth from baby boomers to millennials is projected to take place by 2030.

The popularity of robo-advisers is also on the rise. PwC predicts that assets managed by robo-advisers will reach $5.9 trillion by 2027, more than double the figure of $2.5 trillion in 2022. This trend is evident in JP Morgan’s acquisition of UK robo-adviser Nutmeg for $700 million in 2021.

**Mergers and Acquisitions Trends in Asset and Wealth Management**

Another significant trend in the asset and wealth management industries is the increase in mergers and acquisitions. Companies are turning to M&A to enable vertical integration and capture growth opportunities in a changing landscape.

Goldman Sachs, for example, unified its asset and wealth management areas under one business, demonstrating the deeper vertical integration of the value chain. Similarly, Schroders recently acquired Benchmark Capital to expand its offerings and continue its vertical integration strategy.

In a report by Bain, they highlighted both scale and scope M&A trends in the industry. While the share of “scale” deals valued at $1 billion or greater is expected to decrease, there is expected to be a significant increase in “scope” deals. These deals are made to gain digital capabilities, expand offerings and ecosystems, and continue vertical integrations.

Bain also expects continued scale activity for wealth management companies, especially those that have embraced technology. As the largest wealth managers outpace the market, the benefits of scale become more apparent. Shifting from a traditional to a digitally enabled wealth management model can result in returns to scale up to 35% higher.

Consolidation is also a prominent trend in the industry. PwC’s global survey found that almost three-quarters of asset managers are considering acquiring or merging with a competitor as business models come under increased pressure. The market is witnessing the consolidation of companies as firms seek cost efficiencies and strive for market competitiveness.

**Reshaping the Future of Asset and Wealth Management**

In conclusion, the asset and wealth management industries are undergoing significant changes driven by AI, technology advancements, and strategic objectives. Firms are embracing robo-advice and AI to provide customized solutions to retail investors and meet evolving customer expectations.

Mergers and acquisitions are becoming prevalent as companies aim for vertical integration, gain digital capabilities, and expand their offerings. Consolidation is also shaping the industry as firms seek cost efficiencies and navigate market pressures.

As technology continues to advance, and customer demands evolve, it is crucial for asset and wealth managers to stay agile and embrace innovation. The industry will continue to transform, driven by these trends and the ever-changing dynamics of the market.