The firm forecast that total assets under management (AUM) in the wealth management industry will grow at a slower rate of 1.5% between 2016 and 2019 - compared to 7.7% in 2015.
This is due to increased investor uncertainty and a deteriorating economic outlook for the UK.
Fees would also come under pressure, said the EY ITEM club outlook.
Meanwhile, life insurance will see a stronger growth, with insurance premium income set to rise 2% in 2017, albeit down from 3.4% in 2015.
The demand for annuities will be depressed as the 20-year gilt yield will average only 1.9% in 2017 compared to almost 4% over the last decade.
Omar Ali, UK financial services managing partner at EY, said each financial sector faces “unique pressures” given the UK dire economic predictions.
Declining economic growth
Latest forecasts from EY put the UK’s economic growth at of 2.6% for this year and 2.3% for 2017, having been revised down to 1.9% and 0.4% respectively following the referendum.
For 2018 the forecast has been cut from 2.2% to 1.4%. Unemployment is predicted to rise to 7% and disposable household incomes will rise by only 1.5% in 2017.
“Undoubtedly, the landscape in which financial services firms are operating has altered - consumers and businesses are going to think twice before they borrow, and be careful about what they invest in. It also looks like low interest rates – which affect all sectors - are here to stay,” said Ali.
However, Ali added that the economic pressures are not that different from what “the industry has been contending with over the past eight years” amid a persistently low rate environment in the aftermath of 2007-2008 recession.
“In fact, thanks to the rigour instilled in their businesses through the crisis, the financial services industry is probably amongst the sectors best placed to deal with this within the UK,” he said.