Wealth and asset managers brace for pressure and consolidation

Investing

2023 will continue to see mergers and acquisitions activity in the asset management industry, predicts Rita Da Silva, EY Oceania Wealth and Asset Management Leader.
The drive for digital transformation of all aspects of their business that accelerated during the Covid-19 pandemic will advance further for wealth and asset managers, Da Silva says.

During 2022, global markets and financial services firms continued to be impacted by volatility caused by geopolitical conflict, inflation, central bank intervention and increased regulatory action, further exacerbated by the competitive talent environment, the rise of responsible and impact investing and Covid-19 related disruption still lingering.

Rita Da Silva, EY Oceania Wealth and Asset Management Leader, says these drivers will continue into 2023 and Australia’s asset managers will need to accept and respond innovatively to this landscape. 

“With pressure on returns, margins and profitability impacted by market conditions, and scale and consolidation seen as key answers, 2023 will continue to see mergers and acquisitions activity in the asset management industry, including in the superannuation sector, where further consolidation will push asset managers into fewer relationships. With interest rates rising around the world and investors continuing to look for high-yield opportunities, we’re likely to see superannuation funds continuing to expand their presence in areas such as private debt.

The drive for digital transformation of all aspects of their business that accelerated during the Covid-19 pandemic will advance further for wealth and asset managers, Da Silva says, as front and back-office functions implement more automated processes and tools to help reduce costs and create more efficiencies.

“The delivery of advice will also be subject to regulatory overhaul during 2023, with the Quality of Advice Review expected to be delivered. Balancing these demands remains a challenging prospect for the sector. Regulators are focussed on operational resilience and risk management and true to label disclosures, including green washing. This will impact the whole wealth and asset management ecosystem.”