AI Could Shutter Some Wealth Management Firms, PwC Survey Shows

Artificial intelligence is expected to help push nearly one out of every six asset management companies to go out of business or be taken over by 2027, a new PwC survey predicts.

According to the survey, 16% of asset and wealth managers are expected to be out of business or absorbed by other businesses in four years. It’s twice the historical pace of natural turnover. But nearly 90% of institutional investors believe the use of disruptive technological tools including AI will lead to better outcomes and returns from their portfolio.

The survey released Friday is based on PwC’s latest industry projections and a survey of 250 asset managers and institutional investors. Key findings include:

• More than 90% of asset managers already use disruptive technological tools including AI, big data, and blockchain to improve investment performance. Assets managed using robots will reach $5.9 trillion by 2027, more than double the figure of $2.5 trillion in 2022.
• The industry grapples with challenges in digital transformation, shifting investor expectations, consolidation, and other matters. 73% of asset managers consider strategic consolidation in coming months to gain access to new segments, build market share, and mitigate risks. PwC expects the top 10 largest asset managers will control about half of all global mutual fund assets, which is up from 42.5% in 2020.
• Global assets under management fell to $115.1 trillion in 2022—nearly 10% below the prior year—showing greatest decline in a decade. Inflation, market volatility, and interest rate movements ranked the biggest concerns for investors and asset managers over the next two years. Assets under management are expected to rebound to $147.3 trillion by 2027, representing a compound annual growth rate of 5%.