Over the next 3 years, the asset management industry will experience an average annual growth rate of +5,5%, with assets under management in Italy amounting to 2.536 billion euros in 2020. This is PwC's forecast presented in the study "The Asset Management industry in 2020", focused on the strategic drivers that will support the asset management players.
Great growth potential
Assets under management in Italy recorded a CAGR of +2012% in the period 2016-10,2, rising from 1.194 billion euros to 1.943 billion at the end of 2016 thanks to the growth of insurance products and pension funds.
The prospective scenario to 2020 sees the consolidation of this increase, albeit at a more moderate pace, linked to the great potential for growth in assets under management: only 30% of the financial assets of Italian households are managed today, against a European average by 41%. The wealth management industry will have to respond to this opportunity with new service models and new solutions.
Mauro Panebianco, Partner of PwC and AWM Consulting Leader Italy, comments: “In recent years, the wealth of Italian households has shifted towards asset management products to cope with the near-zero returns on investments that have always been favored by Italians i.e. government and bank bonds. Considering that less than 50% of the financial wealth of Italian households is invested in asset management products, we expect this trend to continue in order to get even closer to the European average. Furthermore, the growth of wealth, despite the economic crisis of recent years, driven above all by a polarization of wealth towards private households, has further supported the growth of the sector".
Technology and new digital models
Wealth management players will be able to leverage analytical tools and new digital models for more efficient cost management - reducing the cost-to-serve for the retail segment served with robo advisor tools - and a remodeling of their offer, including solutions aimed at younger customers, with a strong propensity for direct management of their investments.
These solutions will therefore allow a more dynamic management of existing customers as well as the increase of the customer base, extending it to non-loyal customers from other banks. For example, one aspect that will be profoundly innovated is communication with customers, made more interactive, more immediate and more convenient, with a reduction in operating costs and more efficient management of operational risk.
The regulatory challenge
The main regulatory changes (MiFID II / MiFIR) will lead to a revision of the current business model, with the following implications for wealth management:
- higher costs of transparency and regulatory compliance, with consequent compression of margins and reduction of fees;
- possible regulatory pressure on inducements;
- increase in the complexity of distribution agreements due to the need for greater transparency (product governance, target market, ..).
On the other hand, opportunities will arise for players who will be able to offer solutions able to reduce the complexity for distributors and maintain high levels of remuneration (ie placement platforms and asset management in funds) as well as customized products which will allow to intensify customer loyalty.
Demographic factor: an increasingly elderly population
The percentage of the elderly (> 64 years) of the total working age population will reach 25,4% in 2050, up from 11,7% in 2010. These figures pose significant challenges for the wealth management industry which , in developed countries, it will have to provide specific products for the post-retirement and, in emerging economies, develop products aimed at the emerging middle class and which, globally, will grow by 180% until 2040.
The product portfolio
The current context of the financial markets polarizes investments between highly specialized and passive products. In the first category, the growth of alternative investments confirms how they represent an opportunity for diversification and extra return for institutional and HNWI investors, increasingly accessible also to affluent and retail customers through wrap instruments (asset management and funds of funds). . On the other hand, passive instruments and ETPs find more and more space in the core part of the asset allocation of retail portfolios but not only.
Furthermore, there has been a strong growth in "package" financial products (asset management, funds of funds, life insurance products) which confirms how Italian savers with a high propensity to delegate seek investments for specific financial needs, linked for example to the preservation of capital or retirement goals.
Mauro Panebianco, Partner of PwC and AWM Consulting Leader Italy, comments: “Technology, regulation, the generation of millennials and the aging population will push wealth managers to focus on personalized and digital solutions, on high value-added services such as corporate, art and real estate advisory, as well as on succession planning and the management of tax issues. The risk of a compression of margins, due to both a reduction in commissions and an increase in compliance costs, will make it increasingly necessary to leverage economies of scale which will inevitably lead to a consolidation of the sector”.
