Asset and Wealth Management: Robotic Advisors are Here to Stay

Being vulnerable to various geopolitical, macro, and microeconomic factors, and regulatory frameworks, the investment sector has always had a significant impact on the cluster of its closely-related industries, including the asset and wealth management segment. As a result of the wave of digitalization, the asset and wealth management ecosystem is moving towards innovative ways to offer digital, yet cost-effective solutions, and eventually, robotic advisors or robo-advisors have gained immense popularity among market players.

As cost margins are squeezed in the asset and wealth management industry due to the strict regulatory environment and increased customer price sensibility, robo-advisors are becoming a cost-efficient option for companies in the market. Robo-advisors are likely to enhance - not replace - the job of human advisors in the asset and wealth management market, redefining the emerging trends in the landscape.

The takeover of the investment sector by the digital generation has been fueling technological innovation in the asset and wealth management landscape, and a recent study published by Transparency Market Research (TMR) tracks the impacts of the undercurrents in the market.

asset and wealth management market strategy

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Asset and Wealth Management Emerging from One-to-one Advisement to New Tech-driven Options

In the rapidly-advancing and hyper-competitive investment industry, the old ways of product-led solutions for asset and wealth management have become completely obsolete. Investors are demanding more profitable options for asset and wealth management that can also ensure regulatory compliance. The industry is moving away from being tech-shy, and this has induced a tectonic shift from the adoption of hardware-based asset and wealth management solutions to their software-based variants.

In 2018, the asset and wealth management space reached a valuation of ~ US$ 3.8 million, and it is expected to reach the ~ US$ 3.9 million mark in 2019. Advancements in technologies, generational changeover of wealth, and a major overhaul of regulatory policies indicate an inflection point of the asset and wealth management market. Increasing regulatory pressures are encouraging asset and wealth managers to embrace new digital FinTech solutions to improve efficiency and reduce costs.

The onerous regulatory environment will continue to influence asset and wealth management business models, which will reflect in tremendous rise in electronification. However, most asset and wealth management firms are still holding onto traditional and outdated execution models, lacking technological expertise for trading technology integration.

While the asset and wealth management landscape remains highly volatile due to the changing regulatory framework, relentless cost pressures are further coercing market players to quickly adopt new tech-driven investment strategies.

In addition, the emerging investor base, which is more digitally-oriented, is adding to this pressure of electronification. As such, the need for offering a fluid multi-channel customer experience by shifting to next-generation trading technologies in a short time span will continue to remain a critical challenge for asset and wealth management firms in the coming years.

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Outsourced Asset and Wealth Management Services for Banks to Prove Profitable

The positive growth prospects of the asset and wealth management landscape can mainly be attributed to the trend of outsourced chief investment officer (OCIO) in end-user organizations. A mounting number of asset and wealth management firms are inclining towards offering outsourced services, as this gives them access to thousands of businesses in a broader range of industries.

In 2018, asset and wealth management services accounted for half the revenue share of this landscape, and the trend is likely to grow stronger with the rise of outsourced OCIO firms in the industrial environment. Asset and wealth management firms are likely to increase focus on the banking sector, as most banks and specialty finance institutions are flocking to adopt digital asset and wealth management services.

Banks accounted for ~ 40% revenue share of the asset and wealth management landscape in 2018. In the coming years, the increasing need for enhancing customer experience and expanding into new markets will continue to create more lucrative opportunities for asset and wealth managers in the banking sector. Leading players in the landscape are expected to support the journey of digital transformation of banks with technologically-advanced asset and wealth management services.

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North America Remains the Largest Revenue Pocket for Asset and Wealth Managers

Though developing economies have leapfrogged developed countries in terms of industrial growth, the relatively stronger economic status of the United States (U.S.) and other leading European economies has remained the driving engine for asset and wealth management in developed regions.

Increasing growth of the investment sector in North America indicated a palpable shift towards high-tech asset and wealth management solutions, not only among large enterprises but also across the long tail of smaller businesses. In 2018, revenue share of the asset and wealth management market in North America was ~ 60% of the global market, and this is expected to increase even further in the foreseeable future.

Market leaders are adopting fee compression strategies, employing pricing of asset and wealth management solutions as a lever to grow in North America. Meanwhile, in developing countries, especially in Asia Pacific, the strategies of market players are likely to revolve around improving technological penetration to leverage increasing economic growth of the region, in the near future.

Changing Competitive Landscape Influenced by the Impacts of Coopetition

The competitive landscape of the asset and wealth management market is highly consolidated, with ~ 30% revenue share of leading market players and ~ 40% revenue share of their prime competitors in the market. Though the frontrunners have a stronghold on this landscape, emerging players offering highly-personalized and data-driven asset and wealth management services continue to pose a threat to their position in the market.

Market leaders, including IBM Corporation, Fidelity National Information Services, Inc. (FIS), and Infosys Limited, are competing on technological expertise, and continue to gain customer trust with their cyber-security solutions. Meanwhile, their competitors and emerging players, such as SAS Institute, Tata Consultancy Services (TCS), and Capgemini SE, have adopted strategies such as joining forces with other businesses to improve their sales performance in the asset and wealth management market.

Some of the examples include,

  • In March 2018, SAS Institute announced that it had partnered with Wolters Kluwer – a leading information services company based in the Netherlands, to offer an integrated finance and risk management, and regulatory reporting software solution to ABN AMRO Bank N.V. – a leading Dutch bank with its headquarters in Amsterdam. The company also declared that, the software solution will be the integration of the SAS® risk and finance solution for finance and risk analytics and Wolters Kluwer’s OneSumX for regulatory reporting; and asset and liability management (ALM).
  • In November 2018, TCS, announced that it had purchased the assets of BridgePoint Group, LLC – a U.S.-based financial services and management consulting firm. TCS declared that, while it had already partnered with the top eight banking, financial services, and insurance institutions (BSFIs) in the U.S., this acquisition would strengthen its foothold in financial services and insurance domain knowledge, especially in the U.S. retirement services segment.
  • In October 2018, Capgemini announced that it had acquired 20% stake in Azqore, a subsidiary of Indosuez Wealth Management—the wealth management brand of the Crédit Agricole group, which offers its technology outsourcing services in the wealth management sector in Europe. The company further declared that, this coopetition would complement Capgemini’s expertise with a wide range of digital wealth management solutions in the technology outsourcing and banking transactions market of Europe.
asset and wealth management market segmentation

Analysts’ Viewpoint

Authors of TMR’s study on the asset and wealth management market are of the opinion that, the growth of the market will continue to be majorly impacted by various macro and microelectronic factors and regulatory environment in various regions. The primary driving engine for the landscape will be the convergence of the technology and finance industry, and tomorrow’s customer base developing a proclivity towards digital investments.

As the regulatory framework changes quite frequently in the finance industry, the demand for regulatory reporting solutions will increase in the asset and wealth management industry. Market players will witness immense pressure to quickly shift to digital asset and wealth management solutions and services, and this may reflect in collaborations between technology companies and firms operating in the finance sector.

The need for enabling end users to enhance customer service experience and offering cyber-security solutions in asset and wealth management is only growing stronger among end users. Eventually, market players will need to increase their focus on deploying robo-advisors to strengthen their position in the market.

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Global Asset and Wealth Management Market: Overview

  • According to a new market report pertaining to the global asset and wealth management market published by Transparency Market Research the global asset and wealth management market is projected to reach a value of US$ 5.2 Bn by 2027.
  • The asset and wealth management market is projected to expand at a CAGR of ~ 4% from 2019 to 2027.
  • The growth of the asset and wealth management market can be attributed to the high demand for digital content and exponential growth in content volumes.
  • Europe is anticipated to lead the global asset and wealth management market, followed by North America, during the forecast period. 

High Growth due to Rise in Cross-Border Investments and Demand for Robo-Advisory Solutions

  • The asset and wealth management market is being fueled by the increasing adoption of robo-advisory software for asset and wealth management solutions by financial institutions.
  • Companies are focusing on customer services that are built on three pillars i.e. consistent, quantitative advisory process; multi-channel integration; and personalization. These pillars help a company to provide consistent advisory services through a human or robo-advisor.
  • Robo-advisors provide optimal risk/return profiles and allocate assets according customer needs. Additionally, they also provide quantitative data analysis such as income, expenses, assets, and credits, and offer solutions accordingly.
  • Rising competition in the asset and wealth management market is forcing organizations to adopt advanced technologies such as robotics, big data, blockchain, and artificial intelligence. This helps organizations to differentiate themselves from competitors.
  • Moreover, companies are able to provide proximity, speed, and highly-customized services with the help of digital ecosystems.
  • Decreasing margins are also forcing companies to use new digital technologies and provide value-added services to customers. 

Asset and Wealth Management Market: Taxonomy 

  • The global asset and wealth management market has been segmented based on component, institution, and region.
  • In terms of component, the asset and wealth management market has been segmented into hardware, software, and services.
  • Based on institution, the asset and wealth management market has been divided into banks, broker dealer, specialty finance, and wealth advisors.
  • Among the institution types, the banks segment is expected to witness continuous growth in the asset and wealth management market.
  • The demand for asset and wealth management solutions by financial institutions is expected to increase during the forecast period. 

Asset and Wealth Management Market: Regional Outlook

  • In terms of region, the global asset and wealth management market has been segmented into North America, Europe, Asia Pacific, the Middle East & Africa, and South America.
  • North America led the global asset and wealth management market, accounting for a substantial market share in 2018, with the U.S. and Canada being the major asset and wealth management markets in the region.
  • The Asia Pacific asset and wealth management market is expected to grow at a rate of ~ 3% during the forecast period, owing to the large expansion of the banking and financial sector.
  • The asset and wealth management markets in Middle East & Africa, Europe, and South America are also expected to expand moderately during the forecast period.

The report provides in-depth segment analysis of the global asset and wealth management market, thereby providing valuable insights at macro as well as micro levels. Analysis of major countries that hold growth opportunities or account for significant shares has also been included as part of the geographic analysis of the asset and wealth management market. 

Asset and Wealth Management Market: Competition Dynamics 

The research study includes profiles of leading companies operating in the global asset and wealth management market. Key players profiled in the report include

  • SAS Institute, Inc.
  • Tata Consultancy Services Limited
  • Oracle Corporation
  • IBM Corporation
  • Dell EMC
  • Capgemini SE
  • Cognizant

Transparency Market Research (TMR) recently published a market study on the global market for asset and wealth management. It presents complete assessment of the key market dynamics, including the drivers, market trends, and challenges, as well as the structure of the asset and wealth management market. TMR’s study offers valuable information about the asset and wealth management market, to elucidate how growth will discern during the forecast period of 2019-2027.

Key indicators of market growth, which include Year-on-Year (Y-o-Y) growth of the market, value chain, and supply chain analysis, as well as Compound Annual Growth Rate (CAGR), are explained in TMR’s study in a comprehensive manner. This information can help readers understand the quantitative growth prospects of the asset and wealth management market during the forecast period.

An extensive analysis on leading market players’ business strategies is also featured in TMR’s study on the asset and wealth management market. This can help readers understand the important factors to envisage growth in the asset and wealth management market. Readers can also find, in the study, precise information on the qualitative and quantitative growth prospects of the asset and wealth management market, which can help market players make apt decisions in the future.

Key Questions Answered in TMR’s Asset and Wealth Management Market Study

  • Which are the leading companies in the global asset and wealth management market?
  • What is the scope of growth for asset and wealth management companies in the banking sector?
  • What is the influence of changing trends in technologies on the asset and wealth management market?
  • What are the risks of investing in emerging markets for asset and wealth management?
  • How are the changing GDPs (gross domestic products) of developing countries impacting the growth of the asset and wealth management market?
  • Which factors will impede the growth of the asset and wealth management market during the forecast period?
  • Will North America continue to remain the most profitable regional market for asset and wealth management companies?

Research Methodology

A unique research methodology is utilized by TMR to conduct extensive research on the growth of the asset and wealth management market, and reach conclusions on the future growth parameters of the market. The research methodology is a combination of primary and secondary research, which helps analysts ensure the accuracy and reliability of the conclusions.

Secondary resources referred to by analysts during the production of the asset and wealth management market study include statistics from governmental organizations, trade journals, white papers, and internal and external proprietary databases. Analysts have interviewed senior managers, product portfolio managers, CEOs, VPs, marketing/product managers, and market intelligence managers, who contributed to the development of this report as a primary resource.

The exclusive information provided by primary resources and secondary resources acts as a validation from asset and wealth management market players, and makes TMR’s estimates on the future prospects of the asset and wealth management market more accurate and reliable.

Segmentation of the Asset and Wealth Management Market

TMR’s study on the asset and wealth management market classifies information into three important segments - component, institution, and region. Changing industry trends and other important market dynamics that are associated with these segments of the asset and wealth management market have been discussed in detail.

The study also offers complete information about the developments in the asset and wealth management market, based on components of asset and wealth management systems and end-user institutions across five geographical regions - North America, Europe, Asia Pacific, the Middle East & Africa, and South America.

Component

Hardware

Software

Services

Institution

Banks

Broker Dealers

Specialty Finance

Wealth Advisors

Region

North America

Europe

Asia Pacific

Middle East & Africa

South America