BlogMainNext in Asset and Wealth Management: Five Strategies to Drive Transformation Amid Economic ChallengesAs the asset and wealth management (AWM) industry grapples with recent economic and market pressures, firms must adapt swiftly to navigate evolving investor expectations, technological advancements, and generational shifts in wealth. The recent past has tested traditional strategies, compelling AWM firms to rethink their approach to growth, efficiency, and client engagement. Investors expect more tailored, cost-effective solutions, and younger generations inheriting wealth bring fresh investment philosophies. Relying on past methods for growth is no longer sustainable, and firms that delay transformation risk becoming obsolete. Given these dynamics, we project that as much as 16% of AWM firms could face consolidation or failure by 2027. To stay relevant, AWM leaders must embrace digital transformation, strategic growth, and a commitment to trust, positioning themselves not only to survive but to excel. Next in Asset and Wealth Management: Five Strategies to Drive Transformation Amid Economic Challenges

Five Key Actions for AWM Firms to Drive Transformation

1. Pursue Growth via M&A and Strategic Partnerships

Facing fee pressures and a challenging economic environment, many AWM firms are turning to mergers, acquisitions, and partnerships to diversify and expand into new asset classes, client segments, and geographical regions. For wealth managers, especially those within banks and insurance companies, strategic partnerships can help reduce costs, increase client reach, and expand capabilities.

Successful M&A initiatives require rigorous evaluation of financial and operational compatibility, along with cultural alignment. When evaluating opportunities, leaders should prioritize shared investment philosophies and a collaborative approach to client engagement, as these factors can make the difference between a transformative deal and one that simply meets expectations.

Key Actions:

  • Consider operational and cultural fit alongside strategic goals.

  • Evaluate talent management practices, especially regarding team integration and compensation.

  • Ensure that M&A and partnership goals align with long-term strategic objectives and that post-deal integration is seamless.

2. Deepen Relationships with High-Net-Worth (HNW) Investors; Leverage Private Market Products

Private market products are gaining traction among HNW and retail investors seeking diversification beyond traditional public markets. AWM firms increasingly focus on offering private market products to cater to this demand, encouraged by new regulations and technological advancements that make these assets more accessible. However, expanding into private markets requires robust operational, compliance, and technological infrastructure to ensure effective management.

Private market products can now reach a broader audience, including the mass affluent and younger investors, but maintaining this reach will necessitate efficient secondary market platforms and advanced technological capabilities. AWM firms should invest in technology that allows retail investors to freely trade and access a diverse range of funds, while also upskilling their teams to navigate the complexities of alternative investments.

Key Actions:

  • Build new relationships with private banks and develop strategic distribution models.

  • Familiarize teams with the requirements and risks of new products such as BDCs, interval funds, and tokenized funds.

  • Align C-suite leaders on a strategic approach to alternative assets, ensuring compliance, operational readiness, and client engagement.

3. Harness Generative AI (GenAI) for Strategic Digital Investments

Generative AI offers transformative potential across the AWM industry, from enhancing data analytics to optimizing operational efficiency. GenAI can streamline due diligence, automate reporting, and improve client insights, enabling firms to respond quickly to changing investor preferences. For wealth managers, GenAI can personalize client interactions by analyzing individual risk profiles, goals, and financial situations. AI’s ability to democratize data and research capabilities also allows smaller firms to compete more effectively.

To maximize GenAI’s benefits, firms should adopt a structured approach, including establishing an executive-level AI lead to oversee implementation, governance, and compliance. As a highly regulated sector, the AWM industry must integrate GenAI carefully to avoid potential data privacy and compliance risks.

Key Actions:

  • Assess the firm’s AI readiness, including data management, governance, and strategic alignment.

  • Appoint a dedicated AI leader to coordinate with legal, compliance, and risk functions.

  • Implement robust GenAI governance to safeguard client data and maintain regulatory compliance.

4. Integrate Tax Strategy into Broader Transformation Efforts

Tax considerations are integral to AWM firms’ business strategies, whether expanding into new asset classes, forming partnerships, or pursuing digital transformation. Optimizing tax processes can drive value creation, cost savings, and operational efficiencies, particularly in a global environment where tax rules vary widely.

Outsourcing tax functions, especially in high-complexity areas, allows AWM firms to streamline processes and focus on core activities. Many firms turn to managed tax services for their ability to consolidate tax, finance, and compliance functions under a single, cost-effective platform. Regular tax reviews can ensure that a firm’s tax strategy aligns with evolving regulations and operational goals.

Key Actions:

  • Evaluate the efficiency of the current tax technology stack and assess outsourcing options.

  • Consider managed tax services to reduce internal costs and enhance compliance.

  • Conduct regular tax reviews to ensure alignment with corporate objectives and operational risk management.

5. Make Trust a Core Value for Brand Differentiation and Stakeholder Engagement

In today’s competitive environment, trust is critical to attracting investors, retaining employees, and navigating regulatory scrutiny. Investors demand transparency, accuracy, and reliability in reporting, while employees seek workplaces committed to social responsibility, DEI (Diversity, Equity, and Inclusion), and ethical standards. Building trust requires strong data governance, clear communication of the firm’s values, and active stakeholder engagement.

Establishing a culture of trust starts with the CEO and executive leadership team, whose actions and tone can shape the entire organization’s approach to trust-building. AWM firms should invest in DEI initiatives, share success stories, and demonstrate their commitment to social and environmental goals to appeal to both employees and clients.

Key Actions:

  • Foster a culture of trust, emphasizing transparency and ethical practices.

  • Empower the CEO and executive team to champion DEI and sustainability initiatives.

  • Build a cohesive trust strategy, ensuring that DEI and social responsibility efforts are integral to the firm’s brand identity.

Embracing Transformation to Succeed in the New AWM Landscape

As the AWM industry confronts mounting pressures, transformation is no longer optional but essential. Firms that can effectively execute these five strategies will be well-positioned to thrive. By pursuing growth through M&A and partnerships, leveraging AI and digital tools, integrating tax strategies, and prioritizing trust, AWM firms can secure their future in a rapidly evolving market.