Why wealth managers need to change their business models

By International Adviser, 28 Sep 16

Faced with an increasing pressure on margins and the cost of regulatory compliance, EY gives five tips on how wealth managers can change their business models to weather the storm of digital disruption.

1. Shift toward revenue growth

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There is approximately $120trn (£92trn, €106trn) of client assets managed by global wealth managers, according to a new report by profession service firm EY.

The study, which surveyed more than 2,000 individual clients and 60 wealth management senior executives globally, found a number of potential revenue opportunities for wealth managers.

The research shows that four out of 10 clients are open to switching wealth managers under the right circumstances, meaning $175bn to $200bn of global revenue is up for grabs for those firms willing to change how they operate.

Revenue growth

Wealth managers have indicated their intention to shift their priorities toward revenue growth over the next few years, especially in Europe and the Americas, says EY.

“Over the past few years, wealth managers’ strategic budgets have tilted heavily toward regulatory compliance and operational efficiency. However, looking forward to the next two to three years, a shift toward revenue growth appears inevitable,” reads its reported, entitled

Margin pressures

More than 75% of respondents cited the cost of regulatory compliance as the main cause of declining margins, followed by competitive fee pressure (64%) and macroeconomic conditions (52%). T

Taking the regional view, regulatory compliance costs were most cited in Europe (93%) while APAC highlighted fee pressure as the top factor (88%).

Approximately 50% of firms in North America and LATAM believe margins are still improving, while views are less favourable in APAC (8%) and Europe (11%).

Those citing margin improvements point to the benefits of costcutting measures such as “offshoring, process re-engineering and technology rationalisation”.