Oliver Wyman and Deutsche Bank Research release new wealth management report: Time to Advance and Defend

  • Wealth managers face a number of challenges including pressure on fees and increasing regulation
  • The industry can drive growth by increasing alternative asset allocations, capturing onshore asset growth in emerging markets, exploiting revenue synergies and adapting advisory models
  • Wealth managers should identify new revenue streams while reducing costs by digitising processes

Oliver Wyman and Deutsche Bank Research have released a new wealth management industry study entitled Time to Advance and Defend.

Wealth management valuations have reached record highs in recent years. Going forward, rising US interest rates represent a strong cyclical upside for the industry as a whole. However, assets under management growth is expected to slow from eight percent per year to five percent per year until 2021 on the back of lower asset returns. Fee levels may come under pressure due to higher transparency standards, disruptive competitors and the shift to passive products. The report estimates an 11 percentage point drag on industry profitability over the next five years.

To drive future growth and profitability, wealth managers should:

  • Increase allocations to alternative assets
  • Capture onshore assets under management growth in emerging markets
  • Exploit revenue synergies through greater cross-selling
  • Adapt advisory models, for example by investing in digital capabilities
  • Automate and digitise processes to enhance accuracy, security and efficiency

Mathieu Vasseux, Practice Head – Oliver Wyman Financial Services (MEA), said: “To win in this environment, wealth managers must shift their focus from cost to revenue growth and identify new value sources outside the traditional wealth management value chain.”

The report also elaborates on ways for wealth managers to identify new revenue streams by drawing inspiration from the technology industry, where firms often compete in one or more areas rather than offering an end-to-end service. Potential opportunities include providing non-banking products and services, making wealth management platforms available to the broader market or focusing on niche products or capabilities.

Kinner Lakhani, Head of European Banks Research at Deutsche Bank, said: “Wealth managers have various challenges to overcome to match market expectations. We anticipate fee pressure in the context of modest forecast investment returns while cost pressures are likely to persist. However, these could be partly offset by benefits from rising US interest rates, growth in Asia Pacific and potentially higher client activity.”