How Will AI and Tech Transform Asset and Wealth Management?

The asset and wealth management (AWM) industry is on the cusp of a technological revolution, driven primarily by artificial intelligence (AI) and other disruptive technologies. These innovations are set to reshape the sector, enhancing revenue growth, operational efficiency, and employee productivity. According to PwC’s 2024 Asset & Wealth Management Report, which surveyed 264 asset managers and 257 institutional investors from 28 countries and territories, the impact of these technologies will be profound and far-reaching. AI and tech-as-a-service models are quickly becoming integral to AWM organizations, promising to boost revenues, streamline operations, and provide new avenues for growth.

The adoption of AI and similar disruptive technologies is poised to revolutionize the AWM sector in several key ways. For instance, the swift integration of these technologies is anticipated to spur significant revenue growth; a forecasted 12% increase in revenues by 2028 could be realized by organizations that move quickly to embrace these innovations. The report highlights the rapid projected growth of tokenized investment funds, which are expected to expand dramatically from $40 billion to over $317 billion by 2028, reflecting a compound annual growth rate (CAGR) of 51%. These tokenized funds epitomize the broader trend toward the democratization of finance, allowing for fractional ownership and thereby lowering premiums and expanding market offerings.

The Promise of AI and Disruptive Technologies

Four-fifths (80%) of AWM organizations recognize that AI and similar disruptive technologies will significantly boost revenue growth. Those swiftly embracing ‘tech-as-a-service’ can anticipate a 12% increase in revenues by 2028. The report projects global assets under management (AUM) to reach US$171 trillion by 2028, spurred by a compound annual growth rate (CAGR) of 5.9%. A standout finding is the rapid projected growth in tokenized investment funds, which are expected to soar at a CAGR of 51%, expanding from $40 billion to over $317 billion in 2028. This rise is seen as part of a broader trend to democratize finance by lowering premiums and expanding market offerings through fractional ownership.

Moreover, the report underscores a broader consensus among asset and wealth managers about the significance of strategic partnerships and consolidations in enhancing technological capabilities. Another 81% are actively considering mergers, acquisitions, or such alliances to build a robust ‘extended tech ecosystem.’ This approach aims to foster innovation, enable expansion into new markets, and democratize access to investment products, particularly in light of an anticipated significant transfer of wealth to younger, more technologically savvy investors.

AI as a Transformative Force

Key findings also spotlight the consistent acknowledgment of AI as a transformative force within the industry. Nearly three-fourths (73%) of respondents name AI as the most influential technology over the next two to three years, emphasizing its potential to revolutionize operational efficiency (84%) and employee productivity (72%). The provision of tech-as-a-service by AWM organizations is particularly highlighted as a revenue booster, although there’s a tangible gap in current allocation towards these technologies—more than three-fifths (68%) allocate less than one-sixth of their capital to such innovations.

On the strategic front, the industry is facing a significant skills gap, with 30% of asset managers noting a lack of relevant talent and skills. This talent shortage drives the trend towards M&A activities, with over 73% identifying access to skilled expertise as a primary motivation for such deals. The aim is not just to bolster technological infrastructure but also to enhance human resources critical to navigating the digital disruption. Addressing this talent shortage is vital for organizations aiming to capitalize on AI’s full potential in transforming their operations and competitive edge.

The Rise of Tokenized Investment Funds

The report also underlines the potential of alternative assets, which are projected to grow faster than traditional ones, at a CAGR of 6.7%, reaching $27.6 trillion by 2028. Tokenization emerges as a central theme, seen as a way to democratize finance further and provide diverse market offerings. Yet, despite these promising opportunities, only a minority (18%) currently offer emerging asset classes like digital assets. These emerging asset classes offer substantial potential in expanding market participation and driving new revenue streams, yet their adoption remains limited.

Adding to the complexity is the finding that over half (59%) of institutional investors believe that disruptive technologies may reduce their reliance on traditional asset managers. This suggests a shifting dynamic in investor-asset manager relationships and points toward a more services-centric model facilitated by advanced technology. Such a transition could significantly alter the landscape of asset management, emphasizing the need for firms to adapt their investment strategies and operational models to remain competitive.

Strategic Partnerships and Consolidations

The asset and wealth management (AWM) industry stands on the brink of a technological revolution, driven chiefly by artificial intelligence (AI) and other disruptive technologies. According to PwC’s 2024 Asset & Wealth Management Report, which surveyed 264 asset managers and 257 institutional investors from 28 countries, these innovations are set to transform the sector by enhancing revenue growth, operational efficiency, and employee productivity. AI and tech-as-a-service models are swiftly becoming fundamental components of AWM organizations, promising to boost revenues, streamline operations, and offer new paths for growth.

AI and similar disruptive technologies are expected to revolutionize the AWM sector in numerous crucial ways. For example, the quick integration of these technologies is predicted to spur significant revenue growth; organizations that swiftly adopt these innovations could see a 12% revenue increase by 2028. The report also points to the rapid growth of tokenized investment funds, projected to surge from $40 billion to over $317 billion by 2028, with a compound annual growth rate (CAGR) of 51%. Tokenized funds exemplify the broader trend toward the democratization of finance, enabling fractional ownership, reducing premiums, and expanding market offerings.

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