Analysts at consultancy OliverWyman and wirehouse Morgan Stanley have a simple message for the wealth management space over the next five years: Buckle up.
According to a jointly produced annual report, the rampant dealmaking in the registered investment advisor and asset management sectors that kicked off around 2020 will intensify in the second half of the decade. The firms expect 1,500 “significant transactions” involving asset and wealth managers by the end of 2029, resulting in about 20% of existing firms being acquired.
“These dynamics are already at play,” the analysts wrote. “In 2024, the industry saw record AUM transacted, bolstered by high-profile mergers and thriving mid-market consolidation activity.”
The researchers pointed out that the wealth and asset management industries could remain fragmented as in the past, with the potential to be profitable with a “tight-knit team and a few clients.” Today, however, revenue margins are tighter even as technology and artificial intelligence investments drive costs up. Meanwhile, wealth management clients have greater expectations for services, including seeking “multi- and single-family offices,” the consultants wrote.
Due to these factors, the analysts see dealmaking being driven by “four Cs”: cutting costs through scale, adding client segments and geographies, adding capabilities and accessing either part-time or permanent capital to keep funding the business.
“We expect the combination of these factors to drive consolidation as mid-sized players become attractive targets for leaders seeking further scale and diversification,” the analysts wrote.
In wealth management, Morgan Stanley and OliverWyman, which is owned by MarshMcLennan, predict well over 100 deals per year through 2029, with their estimate in the 120 to 150 range, excluding small transactions (or those generally under $1 billion). That compares to the most deals among wealth managers of 116 in 2024.
The analysts also see a higher range of dealmaking among asset managers and alternative asset managers than in the past: 60 to 90 a year for asset managers and 80 to 120 for alternative asset managers.
In addition to consolidation, there are also fewer net new managers of mutual funds or ETFs per year, with even “buoyant private markets” showing a similar trend.
A good deal of money is in play for the firms that succeed in the coming consolidation. According to the report, in 2024, $135 trillion in assets were managed globally—a 13% increase year over year. Meanwhile, global financial wealth held by private households grew by 8% year over year to $301 trillion.
“For acquirers, the execution playbook is clear yet arduous,” the analysts wrote. “They will need to choose the right target (prioritizing revenue complementarity and cultural compatibility over cost synergy potential), de-risk transactions (manage talent and asset attrition, reduce beta sensitivity in valuations), execute decisively to fend off competition, and run flawless post-merger integration to materialize ambitious return targets.”
In the wealth management space, private equity has been driving much of the dealmaking, with funds entering an “exit cycle” within the five-year period that will also fuel the consolidation.
“Expect trade sales, sponsor-to-sponsor deals and partial recaps to release assets and catalyze further consolidation,” the analysts wrote.
Meanwhile, wealth managers will seek to establish long-term businesses in the face of dealmaking. The analysts wrote that tactics will include focusing on the high-net-worth client segment of $1 million to $10 million, building an “organic growth machine” to bring on more clients, and building a simple, “durable” cost base for its advisors.
The full report was compiled from more than 30 discussions by OliverWyman and Morgan Stanley analysts with senior executives at asset and wealth managers managing over $55 trillion of assets. The report takes a global view, though it notes that wealth growth is most heavily concentrated in North America and the Asia Pacific region.
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