Key facts
- The top 10 wealth management firms now represent 89% of clients, up from 74% in the previous study.
- These firms' market share of assets has slightly decreased to 59% from 62%.
- The total number of portfolio management clients has grown by 20% since 2022.
- 41% of wealth management firms are planning acquisitions or revenue growth strategies.
- Only 13% of firms currently use AI tools, but 45% are considering them within 12 months.
- Gender representation in investment manager roles is low, with women making up 17% of positions.
The wealth management industry is experiencing significant consolidation, with the top 10 firms now representing 89% of clients, according to a Financial Conduct Authority (FCA) report. This marks a substantial increase from the previous study, indicating a concentrated market. While these large firms' share of total assets under management has slightly decreased to 59% from 62%, the overall client base has grown by 20% since 2022.
Many firms are optimistic about expansion, with 41% planning acquisitions or revenue growth, compared to only 18% considering winding down operations. The FCA report suggests consolidation can drive efficiency and growth by pooling resources, expertise, and technology. However, it also warns that rapid growth, if not managed effectively, can lead to poor client service, business continuity issues, and potential failures.
Artificial intelligence adoption remains low, with only 13% of firms currently using AI tools, though 45% are considering it within the next year. The report highlights that firms considering AI represent a significant portion of the market. Areas for improvement identified include fair value assessments for clients, particularly those with smaller portfolios, and addressing the underrepresentation of women in investment manager roles, where they constitute 17% of positions, dropping to 11%-12% for those over 50.
Cerulli Associates also notes the ongoing trend of consolidation, driven by an imperative for firms to become larger and more profitable. The top five wealth management firms control 57% of broker/dealer assets and 32% of advisors, while the top 25 control 92% of assets and 79% of advisors. Many affluent investors prefer to consolidate their assets with a single institution, yet few use the same provider for both cash management and investment services. Mergers and acquisitions can present challenges, including technology integration, client account migration, and cultural shifts, potentially impacting advisor retention.