The changing dynamics of the asset management industry
The asset and wealth management industry is facing a transformative moment. Despite an 12% increase in global assets under management (AUM) to $120 trillion, the profitability and revenue gains have not kept pace. The revenue needle barely moved in 2023, while profits fell 8.1%. Asset managers are feeling a financial squeeze, facing downward pressure on fees. Retail investors, in particular, pay an average of 50% higher fees than institutional investors, sparking a push towards cost-effectiveness. But cutting costs isn’t enough: they must also expand their client base and prepare for an unprecedented generational wealth transfer as baby boomers pass down wealth to millennials and gen Z, whose collective wealth could reach nearly $84 trillion over the coming decades.
This transfer presents a significant opportunity but also a challenge. Millennials and gen Z, often digital-first and values-driven, expect a modern, mobile-friendly approach to managing wealth. They value transparency, ease of use, and personalization, putting pressure on asset managers to adopt new technologies and pivot from traditional relationship models. Technology has become the cornerstone of any strategy to attract and retain these younger generations, enabling firms to provide the digital experiences, data-driven personalization, and socially responsible investment options they expect. Without a tech-enabled approach, firms risk losing relevance and market share as these emerging generations assume greater financial power.
A demanding customer base
Capturing the attention and loyalty of Millennials and Gen Z is no easy feat. This generation of investors seeks control, transparency, and flexibility — characteristics that often require a more agile digital infrastructure than what many legacy asset management firms currently offer.
1.Mobile-first preferences
Younger generations value access to their finances anytime, anywhere. A recent study showed that over 90% of millennials prefer mobile apps for banking and financial services, and expect similar accessibility from their asset managers. This generation wants a seamless, digital experience that allows them to monitor and manage their wealth at their convenience.
2. Demand for transparency and convenience
Millennials and Gen Z are discerning clients who expect transparency around fees, investment risks, and overall performance. In fact, over half would switch financial institutions if they felt their current provider lacked transparency. They want real-time information and insights to make informed financial decisions, a service traditional models often struggle to deliver.
3. Personalized and ethical investment
Socially responsible investing is a priority for younger generations. Research from Morgan Stanley shows that 96% of millennials are interested in sustainable investing, a demand that’s only been amplified by environmental, social, and governance (ESG) concerns. These clients want tailored, socially responsible portfolios, and asset managers that can’t deliver may struggle to gain their trust.
4. Real-time data access
Millennials and gen Z clients have high expectations for immediacy in financial information. Real-time access to financial data, performance metrics, and market insights not only improves transparency but also empowers clients to make informed decisions. Firms that provide real- time, up-to-date data reinforce a sense of trust and reliability — key factors in building long-term relationships with digitally savvy clients.
Tech creates sticky customers for asset managers
To address these challenges, asset and wealth managers are leaning heavily on technology. They are building tech stacks with advanced analytics, predictive tools, and digital customer relationship management (CRM) systems that enhance the client experience from onboarding to daily portfolio management. Here’s how these tools are reshaping the industry:
1.Digital onboarding and CRM systems
Investing in digital onboarding and CRM platforms allows asset managers to provide personalized, efficient service from the first point of contact. Digital onboarding speeds up client acquisition, enables smooth verification, and sets the foundation for a seamless, digital-first relationship. CRM systems also facilitate tailored communication and help identify client needs, leading to stronger client-manager relationships.
2. Advanced analytics and predictive tools
Through advanced analytics, firms can gain deeper insights into client behaviors, preferences, and potential needs, allowing them to create more targeted and effective engagement strategies. Predictive analytics goes a step further by helping managers anticipate life events or changes in risk appetite, enabling proactive outreach and engagement. This is crucial for retaining clients as their financial needs evolve.
3.AI-driven personalization
AI allows asset managers to offer bespoke investment advice and products tailored to individual risk profiles, financial goals, and personal values. Through machine learning algorithms, firms can assess vast amounts of client data to make personalized recommendations. One survey showed that 58% of millennials are likely to switch financial providers for one that offers more personalized services. AI-driven personalization can meet this demand, offering the individualized attention Millennials and Gen Z expect.
4.Engagement on-and off-line
Younger clients expect frequent communication, whether through real-time alerts, personalized notifications, or virtual meetings. Video calls, chatbots, and other virtual engagement tools enable managers to connect with clients instantly, meeting the “always-on” expectation. By making themselves available and responsive through digital channels, asset managers can provide the active engagement younger clients demand.
5. Security and trust
Robust cybersecurity measures, such as biometric authentication and multi-factor authentication, are becoming increasingly important as cyber threats grow. Over half of millennials consider strong data security a primary factor in their choice of financial provider. With stronger security measures, firms can build the necessary trust to maintain client loyalty.
Younger generations are highly conscious of data privacy, and firms that prioritize it are better positioned to win their trust. Clear, transparent privacy policies and top-notch cybersecurity practices ensure that clients’ data is safe. Offering these safeguards not only meets regulatory requirements but also satisfies the expectations of a privacy-focused clientele.
6.Transparency
Asset managers can leverage technology to streamline compliance and improve transparency, particularly in areas like fees and investment risk. This user-centric approach to compliance allows clients to understand exactly where their money is going, further building the trust needed to retain them over the long term.
The time to pivot is now
The asset and wealth management sector remains healthy, with continued growth projected. However, firms must evolve to fully capture the opportunities presented by generational wealth transfer. By embracing technology-led initiatives, asset managers can appeal to younger investors while navigating the constraints of fee pressures and regulatory demands. Firms that adopt a broad, holistic technology strategy — one that spans the client lifecycle, from onboarding to portfolio personalization — are better equipped to meet the expectations of millennials and Gen Z. This will ensure a long-term foundation for growth, relevance, and client loyalty in the age of digital-first wealth management.
About Author
Vice President & Head of Capital Markets Financial Services, Infosys
Sachin Kamat heads the Capital Markets division for Infosys Financial Services. He has extensively worked with leading Asset Management firms to transform their organization and deliver impactful solutions. He leads initiatives to enhance client engagement and drive
operational efficiency. Sachin has worked on multiple technology areas across Capital Markets business to drive technology transformation and build scalable Operations teams. He is focused on driving innovation and partnering with clients to deliver them.
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