Global assets under management will climb to $US102 trillion by 2020, from $US64 trillion in 2012, according to a report from PricewaterhouseCoopers.
In North America alone, AUM is expected to climb to $US49 trillion by 2020, from $US33.2 trillion in 2012. This is more than the AuM for Europe, Asia Pacific and Middle East & Africa combined.
Assets held by mass affluent in North America, those with $US100,000 – $US1 million will rise to over $US100 trillion, from $US59 trillion in 2012. While the wealth of high net worth individuals with $US1 million or more will rose to $US76 trillion, from $US52 trillion in 2012.
The report also found six trends that advisors should watch:
- Asset management comes to the forefront. But to cope with this advisory firms need to invest in data, technology and talent and this could weigh on profits. Profits are currently 15-20% below the pre-crisis level.
- By 2020 there will be four distinct regional fund distribution blocks: North Asia, South Asia, Latin America and Europe. These blocks will develop regulatory linkages and “North American asset managers may need to evaluate their strategy to consider the impact of these linkages.”
- There will be changes to the cost-structure. By 2020, it is likely that major territories with distribution networks may look to introduce regulations to better align interests for the end-customer, which may place more transparency pressure on asset managers and have a substantial impact on the cost structure of the industry.
- Passive and alternate strategies will probably grow at a faster pace than conventional active management. Alternative assets are expected to increase grow by 9.3% a year between now and 2020, reaching $US13 trillion.
- A new breed of global managers will shape the industry. “These managers will not only emerge from the traditional fund complexes, but from among the ranks of large alternative firms as well.”
- Technology will become crucial for “customer engagement, data mining for information on clients and potential clients, operational efficiency and regulatory and tax reporting.”
As the financial advisory industry moves ahead, advisors are already faced with generational changes in terms of both clients and advisors. They should be cognisant of these changes and try to capitalise on them as well.
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