Well-paid front-office workers and operational efficiencies are needed if Europe's wealth management industry is to increase its asset base.
Wealth managers predict 9% per annum average increases in assets under management in the coming years, which will outstrip average revenue growth of 7% per annum, says the report by Oliver Wyman and JP Morgan Asset Management (JPMAM).
This means front line productivity and operational efficiency need to be further increased to address industry-wide cost increases and declining revenue yields.
"Productivity and efficiency will be critical in order to achieve the 9% assets under management and 7% revenue growth wealth managers are forecasting," says Stefan Jaecklin, partner and head of the wealth and asset management practice at Oliver Wyman.
Wealth managers will add a significant number of expensive frontline staff to achieve this growth, but to protect their bottom line, they will need to leverage technology and automation to cut down on operating costs and ensure that their frontline staff remain focused on attracting and servicing clients.
The report, called The future of European wealth management: Imperatives for success, also finds that the vast majority of wealth managers anticipate structural change, with 85% of those asked expecting that larger players will acquire smaller players and 73% expecting some form of consolidation.
Among other findings in the report are:
- Digital innovation will provide opportunities to better engage and service clients, but will also enable innovative players to disrupt the market;
- Regulatory focus on client protection and stability of the financial system is creating numerous challenges for wealth managers, but is also opening up opportunities for differentiation;
- Demand for full tax transparency is transforming the offshore banking model.
Among the researchers' recommendations are that established wealth managers in Europe must learn from technology-based rivals and other non-bank competitors about how they can improve their own digital offerings.
"It is certainly a fact that technological disruption and new business models are now also affecting the wealth management industry – these new players offer a strong value proposition with full transparency and are therefore winning many new clients," said Claude Kurzo, head of strategy and business development in Europe, Middle East and Africa at JPMAM.
But traditional wealth managers should embrace technological disruption, he says.
"They should incorporate the benefits of ease of access, transparency, and automation into their models. The winners will be firms that successfully marry technological advances with the hallmarks of traditional wealth managers – stability, breadth of offering, and most importantly dedicated in-person advice."
The research is based on interviews with chief executives and senior executives from 23 wealth managers across Europe, and an online survey of an additional 136 industry professionals.
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