EY ITEM Club

Outlook for financial services Summer 2015

Forecast for Wealth & Asset Management

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“The continued favourable market conditions and ongoing robust growth in Assets Under Management (AUM) means that the current message for UK asset managers is “steady as she goes.” The industry is sustaining a particularly strong growth phase that has been running for the past 18 months, but concerns about future potential volatility and liquidity continue, as does the never-ending quest for alpha returns.”
Gillian Lofts
Partner, UK Wealth & Asset Management
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EY - Gillian Lofts
Gillian Lofts
Partner,
UK Wealth & Asset
Management

The continued favourable market conditions and ongoing robust growth in AUMs means that the current message for UK asset managers is “steady as she goes.” The industry is sustaining a particularly strong growth phase that has been running for the past 18 months, but concerns about future potential volatility and liquidity continue, as does the never-ending quest for alpha returns. ↓ [... more]

Investing in cost-efficiency and digital…

Given recent positive performance, wealth and asset managers have taken the chance to step back and invest in longer-term strategic projects. A large focus has been on making fundamental improvements to operating models and technology. We have seen significant investments in front-office platforms, global operating models and compliance surveillance technologies. True cost-efficiency programs will help the industry to sustain its future growth.

In addition to this, the sector has started to embrace new disruptive technologies,
digital processes and FinTech, seen as strategically important for shaping the future modus operandi.

…and making the UK a more attractive location for asset managers

With the current phase of industry growth and economic stability coinciding with the election of a majority Government, a further opportunity now faces the industry: the chance to help sustain the UK as the most attractive location for asset managers. Having worked with the UK Government on its initial strategy initiative to attract and retain more asset managers in the UK, we believe there’s a real opportunity for the industry, working with regulators and government, to reinforce the country’s claim to be the world’s number one global centre for asset management.

In our view, these efforts should focus on the following three priorities:

  • Talent — A specialist pool of talent at critical mass makes this one of UK’s biggest attractions for wealth and asset managers. Keen to grow and replenish the talent pool, managers are becoming increasingly involved in developing talent through sponsorships at universities, incubator initiatives and across much wider sections of the population, such as school-leavers. The industry is investing in the future talent of the UK population.
  • Digital — Wealth and asset managers can play a key role in developing and growing disruptive digital technologies and FinTech products in the UK, both from an investment perspective and as users.
  • Transparency and sustainability — Pressure for wealth and asset managers to be more transparent — and more sustainable — has been coming from both regulators and consumers. This is likely to continue and the industry should take the lead in offering innovative solutions, both in underlying investments and products and the ways in which they are described and sold.

Given the common goal of improving the long-term attractiveness of the UK for wealth and asset managers, these are three solid pillars on which the industry, regulators and the Government can concentrate their efforts. And in the spirit of “making hay while the sun shines,” now is the time to do it.

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Wealth and asset management highlights:

The robust growth in AUMs is set to continue. Boosted by the current phase of economic stability, we expect to see investors diversifying into multiple asset classes.

  • Having reached £864b in 2014, we forecast AUMs to rise to £920b this year and to then increase 40% to £1.2t by 2019.
  • AUMs in mixed funds are forecast to reach £183b by 2019, a 44% increase from their 2014 level of £128b, as investors diversify their risk into multiple asset classes.
  • Households’ gross financial wealth rose by 6.4% in 2014 to reach £5.6t, the best performance since 2010. We forecast a 3.4% rise to £7.1t in 2019.
  • Fund of funds are forecast to have £151b under management by2019, a 60% increase from 2014.