The top 10 drivers impacting global wealth and asset management

The top 10 drivers 

impacting global 

wealth and asset 

management

Executive 

summary 

Disruption. Change. Paradigm shift. Threats — or 

opportunities. 

Faced with these challenges, the global wealth and asset 

management industry is entering a perfect storm of client, 

 

Disruption is everywhere. The opportunity to take the complex 

landscape of FinTech disruption and regulatory reform, make 

sweeping strategic changes to technology and solutions, and 

 

industry winners. And leave many on the sidelines. 

 

strategic drivers impacting the industry: 

• Seizing disruption as a game-changing opportunity, rather 

 

drive productivity gains and enhance the client experience 

to better compete and win in the market. 

• Leveraging technology to drive innovation in a highly 

prudent, cost-effective manner with a focus on budgeting 

and project management so that each new strategic priority 

has a clear and measurable goal: better cost management, 

more streamlined processes, enhanced client service. 

• Preparing well in advance, as regulators and investors now 

demand, to mitigate risks of the next liquidity crisis. 

• Re-evaluating focus and alignment on conduct risk from the 

C-suite through the entire organization. Global regulators 

and investors have set the conduct bar high. Tone from the 

top is critical, but execution is critical to success. Getting 

in front of the market by establishing and executing world- 

 

trust and growing business. 

• 

 

sustainability. 

• Ensuring that tax compliance is supported by an integrated 

global infrastructure and an understanding of the unique 

needs of each jurisdiction. Firms must effectively align 

reporting, and leverage technology and service providers, 

 

the appropriate tools for local activity and governed with 

centralized oversight. 

1 | The top 10 disruptive threats and opportunities in global wealth and asset management

EY Global Wealth & Asset Management puts forward what we see as 10 disruptive drivers in global wealth and asset 

management now challenging the industry. 

1 

2 

3 

4 

5 

FinTech and innovation: The future of advice is 

threatened by innovation and FinTech. Firms must 

quickly react to regulators and investors demanding 

more transparency, better risk management, 

enhanced client service and greater clarity in the 

connection between fees paid, services delivered and 

value offered. 

Cybersecurity: The spotlight on cyberthreats is as 

strong as ever. 

Liquidity risk: Misalignment of liquidity was a key 

 

allocation in the current low-rate environment leaves 

investors exceptionally vulnerable to further liquidity 

shocks. 

Conduct risk: 

 

theme of global regulators. 

Long-term conviction vs. short-term action: 

Corporate strategy must balance the need to meet 

near-term earnings targets against the necessity to 

ensure long-term sustainability. 

6 

7 

8 

9 

10 

Investments with purpose: Seeking growth in a 

 

offerings of “investments with purpose” in response 

to changing market dynamics, such as the rise of 

 

often demand investment opportunities that align 

 

Focus on client experience: Firms need to move away 

from their focus on product push and toward building 

their business model based on customer experience. 

Simplifying the proposition: Simple, clear and 

transparent is the new mantra. 

Technology 

will continue to not only deliver further productivity 

gains, but also leverage big data to use client 

analytics and grow distribution. 

Complexity of global tax reporting: Tax reporting is 

 

point in time, but has now become a more complex, 

year-round process. 

The top 10 disruptive threats and opportunities in global wealth and asset management | 

2

The top 10 drivers impacting global wealth 

and asset management 

Introduction 

2016: Embracing disruption, innovation and 

change 

The global wealth and asset management industry continues to 

experience strong growth, primarily due to steadily recovering 

 

 

model in distribution and evolving investor demographics. Firms who 

have focused on lucrative asset classes that offered comfortable 

margins, such as emerging markets (EMs) and high yield, are now 

challenged as many investors become more risk-averse. 

Perhaps the greatest opportunity, or threat, is FinTech. The 

ongoing paradigm shift driven by FinTech disruption should not be 

 

winners after the dot-com bubble usually had only a limited historical 

background in telecommunications and were initially rooted in such 

unrelated sectors as computer hardware and shipping. They were 

 

growth and sustainability. They focused on continually enhancing 

client experience rather than merely pushing products. The winners 

knew how to seize opportunity and innovate. By comparison, many of 

the global entrenched network carriers who dominated the industry 

for decades before the dawn of the wireless and internet era were 

slow to react to change; as a result, they were overtaken by those 

more innovative and disappeared or were forced to restructure. 

 

 

by offering aggressive pricing, compelling messaging and “sticky” 

digital client interfaces. Similar to the telecommunications boom of 

prior decades, FinTech presents the danger, or opportunity, to rewrite 

the list of industry winners across the globe. 

 

regulatory change. Innovators are busy implementing world-class 

 

well in advance of any regulatory implementation deadline. Their 

prize will be the leadership role of “most-trusted service provider” in 

an industry challenged by declining client trust. 

Winning client trust will deliver success through growth. For example, 

the vast majority of the workforce in the developed world still does 

not own any fund products. While in the UK and the US, most workers 

do have exposure to funds at least indirectly through retirement 

accounts, the proportion of potential clients connected to the asset 

management industry is far lower in the rest of the world. According 

to a study by the European Central Bank, the participation rate in the 

asset management industry is around only 6% in Italy and Spain. In 

Greece and Cyprus, it is only 1%. In the emerging and frontier markets 

 

similarly hovers around the single digits. 

This lack of industry penetration in much of the world is due in large 

part to widespread skepticism about wealth and asset managers, as 

well as uncertainty about what value they can deliver. Further, vast 

 

previously considered by much of the industry as uneconomic to 

service. However, with the rise of the new breed of “robo-advisors,” 

a great proportion of these potential clients will soon become 

economically viable as a vast new market segment. 

EY’s Global Wealth and Asset Management practice sees a wide range 

of current issues that will threaten the status quo, drive permanent 

change and above all, present great opportunities to seize for 

sustainable growth. We present our Top 10 for further discussion. 


Top 10 drivers of change 

1 

Seize disruption as an opportunity to 

innovate and win in the market, rather 

than as a threat to the status quo. 

Disruptive trends are challenging the industry. In the FinTech-driven 

paradigm shift now underway, robo-advisors, blockchain and robotics 

are some examples of key accelerators. For the most strategically 

nimble players, these challenges will also deliver the opportunity to 

innovate more quickly, more wisely and more cost-effectively than 

 

FinTech trends are fundamentally impacting the wealth and asset 

management value chain (as shown in Figure 1). Across many sectors 

throughout the global economy, technology is disrupting traditional 

business models. Yet, at the same time, disruption also will create 

 

 

services can deliver cost-saving synergies and drive innovation for 

 

 

In the FinTech-driven paradigm 

shift now underway, robo-advisors, 

blockchain and robotics are some 

examples of key accelerators. 

The wave of FinTech investment in wealth and asset management 

 

demand for vastly enhanced reporting, risk management and 

compliance systems. FinTech in these areas is still only in the early 

stages. EY expects FinTech investment to accelerate rapidly and 

 

 

greater transparency. 

The most immediate manifestation of technology-driven disruption 

and innovation has emerged in the form of robo-advisor platforms 

that can enhance, supplement or, in some cases, replace advisorclient 

interaction. Technology will reshape the future of investment 

 

 

robo-advisor platform, acquire one outright or strategically align with 

 

user interface with at least some degree of automation. Few wealth 

 

must embrace it as a game-changing opportunity to deliver more 

 

 

 

 

automated delivery of advice is changing expectations for a much 

broader investor group, regardless of wealth level. Service-level 

 

 

 

management industry must change and meet those new expectations 

in order to survive and grow. 

The top 10 disruptive threats and opportunities in global wealth and asset management| 

4



 

digital automated client interfaces. This could be full automation with 

limited human intermediation, to partial automation backed up by 

personalized telephone support, to a traditional model that sticks with 

face-to-face advice but also relies heavily on digital tools to improve 

servicing that enable advisors to devote more efforts to advice and 

value-add services. 

Bitcoin, or at least the technology underpinning bitcoin, is another 

emerging driver impacting the industry. Mutual distributed ledgers, 

often referred to as blockchain technology, can deliver greater 

 

And they will threaten the existence of the asset servicing industry as 

we know it today. Asset servicers will be forced to restructure their 

 

rather than compete against it. 

Blockchain technology presents an opportunity to radically transform, 

 

 

 

 

 

 

offered exclusively by a small handful of global custodians. 

Success and survival in asset servicing post-blockchain 

implementation will largely depend on effective industry 

collaboration, the creation of consortia and skillful, strategic adoption 

of new technology. The adaptation and implementation factor is 

arguably more essential than simply picking the best technology. 

 

 

Figure 1: Disruptive digital trends impacting the wealth and asset management value chain 

Digital product and service innovation 

• Reduce costs through 

automation and duplicative 

efforts 

• Improve customer experience by 

reducing lead times and errors 

Digital operations and BPM 

• Build customer loyalty with 

value-added services 

• Increase revenue through digitalenabled 

products 

• Increase sales by improving lead 

generation 

Big data and analytics 

Digital 

disruptive 

trends 

Digital sales and marketing 

• Increase customer loyalty and 

sales conversion 

• Migrate customers to low-cost 

channels 

• Reduce risk costs through 

granular risk evaluation 

Customer experience and channels 

• Drive sales through mobility tools 

(e.g., sales apps on tablets) 


services. The major issue is system governance. A distributed ledger 

requires establishment of a clear ownership and control structure. 

But how can this be best accomplished without creating a natural 

monopoly? What role should global regulators play in administering 

an effective and secure distributed ledger for the asset management 

industry? 

processes and replace manual actions enterprise-wide with 

 

robotic workforce will transform how organizations move data, 

 

automate existing high-volume or complex data-handling actions as if 

the business users were doing the work. 

Robotics are also revolutionizing the entire operations value chain 

to aggressively manage costs, increase productivity, streamline 

Figure 2: Potential ways to put robotics to work in enhancing productivity 

Data handling Digital enablement Data movement 

• 

• Account setup and settlement 

instructions 

• Margin/collateral processing 

• Corporate actions 

• Liquidity compliance reporting; monthly 

liquidity management reporting 

• Tax compliance reporting 

• 

• Client and risk reporting 

• Capturing and conveying intraday 

settlement status 

• Aggregating daily NAV reporting 

• 

• Importing customer portfolios 

• Migrating data from legacy system 

• Streamlining the addition of new 

investment products 

• Consolidating and customizing research 

and markets daily notes 

Further reading: 

Megatrends 2015: making sense in a world of motion, full report available at www.ey.com/Publication/vwLUAssets/ey-megatrends-report-2015/$FILE/ey-megatrends-report-2015.pdf 


6

2 

Intensify cybersecurity preparedness to 

best safeguard the trust of clients and 

regulators alike. 

 

invest aggressively and strategically to protect that trust and 

prevent (prepare for) cyberattacks. Not surprisingly, for most global 

regulators as well as the market at large, cybersecurity has become 

a C-suite concern (as shown in Figure 3). Global regulators and major 

institutional investors are holding informal industry roundtables 

to discuss the threat. For several years, requests for information 

from most major institutions have required details about proactive 

measures taken by their asset managers to understand how they 

 

organization as well as service providers. 

Firms must invest aggressively 

and strategically in order to 

protect that trust and prevent 

cyberattacks. 

 

 

web-accessible digital client interfaces and the increasing use of 

online platforms for product distribution, transactions and data 

storage. Effective cybersecurity can combat money laundering and 

 

One way of thoroughly testing cybersecurity preparedness is to 

conduct so-called Red Team exercises, simulated all-out attempts 

executed by an external IT vendor specialist who plays the part of 

a highly skilled and determined hacker. These real-life exercises 

conducted periodically can identify gaps in cybersecurity and social 

 

also to determine plans of actions to address when attacks may occur. 

Another way to increase cybersecurity preparedness is to scrutinize 

coverageof cybersecurity insurance that would transfer some of 

 

insurance is available to cover many direct short-term measurable 

costs related to a cyberbreach. However, there are many 

idiosyncrasies in terms of when events actually trigger the policy’s 

coverage, and even the most extensive policies won’t likely cover the 

 

cybersecurity insurance market is still nascent, there is wide room for 

interpretation in the wording and exact coverage of policies, and costs 

can be prohibitive. 

Figure 3: Cybersecurity market forces 

1 The technological pace is increasing 2 Accelerating cyberthreats 3 

CEOs at Fortune 500 ® companies reveal their 

top two greatest threats and challenges 1 

1. 

The pace of technological change 

2. 

Cybersecurity 

26.3 

billion more 

It is estimated that there 

will be 26.3 billion more 

than the number 

of humans projected 

by 2020 2 

By the year 2020, 44 

zetabytes of data will be 

created by 7 billion people 

and 

44zb 

connected to the internet 3 

88% of respondents do not believe their information 

security fully meets the organization’s needs 1 

Creating greater cost and resource drain 

USD $400b 

Cyberattacks cost businesses 

US$400 billion every year 1 

There will be an estimated shortfall 

88% 12% 

of 1.5 million professionals in the 

global information security workforce 

within 2 

companies employing more than 

1.5m less 

By 2018, 70% of mobile 

professionals will conduct 

all of their work on personal 

4 

70% 

2016 2017 2018 2019 2020 


3 

Prepare well in advance to effectively 

manage the next liquidity event. 

The extended near-zero-rate environment has driven a widespread 

“reach for yield” among investors. Liquidity risk made headlines 

in December 2015, when several high-yield funds ceased trading 

because of volatile market conditions. The slightest hiccup in market 

expectations about monetary policy can cause investors to rush to 

the door, creating another liquidity event, particularly in thinly traded 

asset classes where redemption provisions are more frequent. The 

low-rate environment is changing risk appetite and how portfolios 

are allocated. Firms can certainly grow their business by catering to 

 

ensure a solid system of liquidity risk controls and well-established 

 

Many global regulators are proposing new requirements to monitor 

 

in September 2015 (comment period ended January 2016), the U.S. 

Securities and Exchange Commission (SEC) sought industry views on 

mitigating liquidity risk. Key proposals included classifying liquidity of 

portfolio assets based on the amount of time they can be converted 

to cash without market impact, and assessing and periodically 

analyzing the risk. The SEC also sought views on the application of 

swing pricing. Many asset managers in the European Union (EU) are 

already using this optional mechanism. Regulators in the EU and UK 

have also commented on suggested actions needed to ensure tighter 

control around liquidity risk oversight. These proposals do not come 

without challenge from asset managers, or even from the boards 

 

risk management systems and processes, with particular attention to 

scenario stress testing, model validation and quality of independent 

 

regulators. 

Firms can certainly grow their 

business by catering to the risk- 

 

income market. But they must 

ensure a solid system of liquidity 

risk controls and well-established 

 

both investors and regulators. 


8



4 

Focus on execution of proper conduct 

enterprise-wide — not merely setting the 

tone from the top. 

The concept of “ensuring good conduct” may seem simple. But 

related to it are great complexities: understanding the current 

legislation, keeping up with how it is developing during the legislative 

process and implementing an effective global compliance system. 

 

complex distribution environment, is high on the agenda for most 

global regulators. In addition, the worlds of politics and media are 

 

 

conduct. Conduct risk is also gaining equal, if not greater, priority in 

 

enterprise-wide risk management attention for much of the last 

decade. The tide of conduct-targeted regulatory change sweeping 

 

governance culture. 

As Mark Carney, Chair of the Financial Stability Board and Governor of 

the Bank of England, commented, “The succession of scandals means 

it is simply untenable now to argue that the problem is one of a few 

bad apples. The issue is with the barrels in which they are stored.” 

 

display to the market the highest 

standards of conduct toward 

advising clients, the prize will be 

winning the status of most 

trusted advisor. 

 

restructured in order to operate in the regulatory environment after 

the European Commission’s revisions to the Markets in Financial 

 

to implement numerous investor protection measures, enhance 

reporting transparency and, most notably, ban sales inducements. 

Fully implementing the highly complex package of conduct-focused 

MiFID-ll provisions will be costly and confusing, and it will force radical 

change in business development and distribution. 

Likewise in the US, both the Department of Labor (DOL) and the SEC 

 

conduct and communication in large parts of the fund distribution 

process. These new rules will be a highly debated topic in the wealth 

 

 

and implementation process. The objective of the new proposals is 

 

advice process adheres to the client’s best interest. 

Industry participants widely agree that the client’s best interest 

 

 

 

vs. noncompliant behavior. Many believe the DOL’s proposal, similar 

to other global conduct risk mitigation initiatives, is too far-reaching 

 

interest,” “recommendations” and “reasonable compensation.” 


5 

Retain commitment to long-term 

sustainable growth, perhaps at some cost 

to short-term results, to ensure future 

industry leadership. 

Corporate strategy is always challenged in balancing the need to meet 

or exceed near-term goals with the desire for long-term growth. In 

 

acute. Whether it’s staying the course on upgrading costly technology 

platforms, integrating global operating platforms or investing in new 

products, markets or disruptive business changes, the demands 

 

growth. Firms must safeguard their commitment and resolve to invest 

in and ensure long-term sustainable growth that will enhance value 

for all stakeholders. 

Firms must safeguard their 

commitment and resolve to invest 

in and ensure long-term sustainable 

growth that will enhance value for 

all stakeholders. 

For example, emerging technologies (such as robo platforms and 

blockchain) have yet to tangibly demonstrate how effectively they 

 

term. As we note later, investor demographics are evolving with a 

greater focus on “investments with purpose.” That is, investments 

focused on sustainable and socially responsible activities (e.g., 

infrastructure, solar farms, and renewable energy) and leaving a 

legacy for future generations. Here, too, there is a need to forgo 

short-term results and provide conviction to commit to longer-term 

 

recognize what’s on the horizon and invest, where possible, ahead of 

the curve to achieve long-term sustainability for all stakeholders. 

Firms also must decide whether they should continue to maintain 

a substantial presence in emerging markets (EMs). Following a 

volatile year in equity markets in China, Russia and many developing 

economies, allocation of resources to EMs has been restrained and, 

in many cases, aggressively curtailed or eliminated. Other than 

Singapore, Malaysia and Turkey, which many no longer consider as 

 

or expansion in many EMs for some time. 

While some bullish analysts say that short-term volatility is typical 

in EMs, and product origination and distribution opportunities may 

still exist, the headline-grabbing corrections in Chinese equity prices 

are not the core issue. These global economies are facing not a mere 

cyclical economic slowdown but, since 2012, the reversal of a 20-year 

 

 

 

in Figure 5.) 

 

they must keep China in their long-term strategic plans. Over the next 

decade, the new tier of emerging nations, driven by their own nascent 

 

will become increasingly connected and interlinked through trade in 

 

 

short, EMs may be down for the short term, but certainly not out for 

 


10

46.9% 

 

81.2% 

30.9% 

23.9% 

11.4% 

27.4% 

0.0% 

2.2% 

4.7% 

9.3% 

-1.2% 

-5.4% -4.2% 

-10.5% 

-19.7% 

2012 2013 2014 2015 

-23.1% 

2012 2013 2014 2015 

International emerging market equity find flows — for US domiciled 

funds* (USD bn) 

Emerging market equity fund flows — for non-US domiciled 

funds^ (USD bn) 

 

region products. 

*International emerging market equity funds invest primarily in equity securities whose 

main trading markets are non-industrialized or emerging market countries. 

^The term non-US refers to regions in Asia, Europe, Latin America and Japan. 

Sources: Strategic Insight and Simfund 

International emerging market equity find flows — for US domiciled 

funds* (USD bn) 

Emerging market equity fund flows — for non-US domiciled 

funds^ (USD bn) 

 

region products. 

*International emerging market bond funds invest primarily in corporate and government 

 

^The term non-US refers to regions in Asia, Europe, Latin America and Japan. 

Sources: Strategic Insight and Simfund 

Focus on the long term 

 

 

implementing cross-border fund passporting schemes. Currently, 

these schemes may not deliver the volume of registrations seen 

under the UCITS (Undertakings for Collective Investment in 

Transferable Securities) regulatory program in the European Union. 

But, in the not-so-distant future, Pan-Asian fund passporting will 

be seen as both vital for economic development in the region and 

 

• Association of Southeast Asian Nations (ASEAN) collective 

investment schemes (CIS): Singapore, Thailand and Malaysia 

 

• Mainland China-Hong Kong Mutual Recognition of Funds scheme 

(MRF): Became operational in July 2015 and allows eligible 

Hong Kong-domiciled funds to be sold directly to investors in 

mainland China, and vice versa 

• Asia Region Funds Passport (ARFP): Will facilitate the crossborder 

distribution of funds across the Asia region. So far, six 

 

Korea, New Zealand, the Philippines and Thailand. 

• Shanghai-Hong Kong Stock Connect (SHKSC): Established to 

provide HK and mainland China mutual stock market access; was 

 

• 

 

 

 

All are regulatory schemes aimed at facilitating onshore and 

offshore investment for China and streamlining the entire 

 

through which international investors can invest in the Chinese 

 

 

funds from investors in China to make overseas investments. 


6 

Recognize growing interest in factors 

beyond risk-return in the product 

suite and meet growing demand for 

“investments with purpose.” 

When deciding how to allocate their assets, more investors are 

focusing on opportunities that deliver a purpose above and beyond 

merely outperforming the market. Such investments carry many 

 

 

of the fastest-growth industry segments in recent years, particularly 

 

 

suite targeted to this complex, growing market segment. 

Service providers across the product manufacturing and distribution 

value chain are seeking growth in a highly competitive industry where 

 

of investments with purpose in response to ever-increasing market 

demand. Clearly, investments with purpose are not just a marketing 

message, but a key to any successful, sustainable growth strategy. 

When deciding how to allocate their 

assets, more investors are focusing 

on opportunities that deliver a 

purpose above and beyond merely 

outperforming the market. 

Figure 6: Investments with purpose represent one of the industry’s fastest growing product classes 

Responsible investment across the globe 

70 

1,400 

Assets under management (US$ trillion) 

60 

50 

40 

30 

20 


0 

6.5 

April 

2006 


April 

2007 

13 

April 

2008 

18 

April 

2009 

21 

April 

2010 

24 

April 

2011 

32 34 

April 

2012 

April 

2013 

45 

April 

2014 

59 

April 

2015 

1,200 

1,000 

800 

600 

400 

200 

0 

Number of signatures 

Assets under management (US$ trillion) 

Number of signatures 

Source: Global Sustainable Investment Alliance 


12



7 

Adapt the core business model to deliver 

outstanding client experiences — not just 

push products. 

 

simply promoting products to building and leveraging a core business 

model based primarily on enhancing the customer experience. 

 

 

 

advises them on heath matters. Moving toward experiences, and the 

relationships underpinning those experiences, is in stark contrast to 

the hard-sell approach, which leaves clients feeling that they are just 

being sold hot new products and leads to subsequent mis-selling risk. 

Rapid implementation of digital distribution in many sectors of the 

global economy has clearly demonstrated an inevitable trend toward 

commoditizing products and services. Commodity providers compete 

primarily on price and are often severely challenged to create a 

distinct brand identity and enhance margins. Yet, the most innovative 

 

 

the personalized client experience. Ultimately, value creation for 

Wealth and asset management 

 

simply promoting products to 

building and leveraging a core 

business model based primarily 

on enhancing the customer 

experience. 

 

 

value will depend heavily on the customer experience, as well as the 

 

lives and address their personal core values and preferences. 

 

opened, as the result of developing a brand identity in the market, 

 

compelling purpose. While moving toward a customer experience- 

 

 

 

sales targets, nor any clear distinction between revenue centers 

and cost centers. In a rapidly homogenized industry with little real 

differentiation between one product suite and another, improving 

client experience will emerge as the only true source of competitive 

advantage. 

More often than not, leaders of the technology industry have 

 

meeting or beating analysts’ earnings-per-share expectations, or 

share price. Instead, the industry titans of technology have usually 

focused with evangelical zeal on radically transforming their entire 

 

software. Such mission-oriented vision is rare in wealth and asset 

management. Nonetheless, to ensure sustainability and long-term 

value creation in a transparent, commoditized and competitive 

 

themselves and adopt a customer experience-based business model 

 

 

shifting from product push to outcome-based solutions. 

The old messaging strategy of “Product X will outperform the index 

because of skilled management and great ideas” will likely fall on 

deaf ears, as investors have become increasingly sophisticated and 

skeptical in the past decade. Instead, the product development and 

messaging strategy will sound more like: “Product X, a multi-asset 

 

management plan and is well-suited to align with your unique long- 

 


8 

Simplify the proposition — and reduce 

unnecessary complexity. 

 

products that, more often than not, were less than transparent in 

risks and fee structure. Complexity was seen as a merit and a strong 

selling point on its own. The more complex the product, the more it 

would intrigue investors. And in many cases, in the end, these less- 

 

with the services they received for the fees they paid. 

For all constituents within the 

product life cycle — manufacturer, 

distributor, investor and regulator — 

the drive will clearly be toward 

simplicity. 

Today, the opposite is true. Simple, clear and transparent is the 

 

 

clearly be toward simplicity. Not surprisingly, growth of the huge ETF 

product class and robo-advisor platforms has been driven by a market 

seeking products and services they can understand. Simplicity has 

been the key to their success. In the UK, following the implementation 

of RDR, for instance, the fastest growing product classes have been 

simple, super-clean share classes and ETFs. It is expected that after 

MiFID-II takes effect in the EU in 2018, simple products will dominate 

 

 


14



9 

Leverage smart technology (and data) not 

 

also growth. 

 

 

 

 

 

 

grow distribution through big data techniques using client analytics. 

 

through automation and headcount reduction. The ongoing drive 

 

in technology, has undoubtedly delivered results. Implementation 

of robotics in many client operations will result in even greater 

productivity gains and more scope for investment in distribution 

(shown in Figure 7). 

 

 

analytics, target messages and services, and proactively adjust their 

product suite to more aggressively grow distribution. Today, leading 

 

 

on social media to gauge the pulse of client demand. 

 

contained within huge data sets, particularly “unstructured data” 

such as video, and derive actionable insights. In the near term, 

advances in technology, such as the increasing power of the Hadoop 

software package to permit distributed processing of large data sets 

across clusters of computers, can potentially drive more targeted and 

sophisticated distribution efforts. 

their product suite well before customers realize the need for 

adjustment. Hadoop-driven analysis could also help identify clients 

and market segments that have the most revenue potential. Macro 

hedge funds with computer-driven investment processes have been 

using analytics for several years to ascertain market-moving company 

information from social media and news feeds. 

Asset managers will adopt similar sophisticated data-mining 

techniques to continually improve not just the investment process, 

but also distribution and business development. Harnessing big data 

appropriately can provide managers with a powerful tool to be more 

insightful and proactive rather than reactive (as outlined in 

Figure 8). 

Firms will become far more thoughtful in how they leverage 

 

 

growth. 

 

 

merely for cost-saving purposes; by 

aggressively leveraging technology 

 

 

big data techniques using client 

analytics. 

 

by using Hadoop to process all available client data, generate more 

 

behaviors and interaction preferences. Firms will be able to adjust 


Figure 8: Big data and client analytics will deliver more 

 

• Deepening “know your client” (KYC) and “know your 

distributor” (KYD) insight 

• Implementing aggressive fraud detection and shoring up 

cybersecurity defenses 

• Identifying clients and market segments that present the most 

revenue potential 

• 

regressed against market environment for guidance on 

product suite adjustment and tweaking marketing strategies 

accordingly 

• Identifying potential client and market demand for new 

products in advance of competition 

• 

• Determining effectiveness and ROI of marketing campaigns on 

a granular market-by-market and product-by-product basis to 

best allocate future advertising spend 


16




Manage global tax complexity as a 

52-week nonstop, enterprise-wide 

compliance challenge. 

Rapidly evolving global tax regulations are driving fundamental 

 

compliance in a controllable and sustainable way (see Figure 9). Tax 

 

 

has become a highly complex year-round process of data collection, 

 

submission. 

Tax reporting is no longer simply 

 

required documents that ends at 

 

compliance has become a highly 

complex year-round process 

of data collection, validation, 

 

report generation and submission. 

Tax compliance has emerged, alongside operational risk management 

and distribution, as a core focus for wealth and asset management 

 

direct resources toward key areas such as FinTech and business 

 

 

invest more in distribution and growth to compete in an increasingly 

price-sensitive global marketplace. 

For over a decade, the Paris-based Organisation for Economic 

Co-operation and Development (OECD) has been proposing 

 

 

Exchange of Financial Information in Tax Matters. The Standard 

is similar in nature to the US Foreign Account Tax Compliance Act 

(FATCA), which presented a substantial compliance burden for the 

 

is an automatic information exchange regime aimed at preventing 

offshore tax evasion and maintaining the integrity of tax systems. In 

 

will need to consider what systems and procedures can be reused and 

recycled from FATCA implementation, and where new developments 

will be needed. 

Included in the OECD recommendations is the Common Reporting 

 

approaching. This is considerably more complex than FATCA (as 

shown in Figure 9). So far, more than 90 countries have agreed to 

implement the CRS. Of these 90, about 50 are committed to mandate 

 

In a recent EY survey of compliance executives in the industry, 

 

 

monitoring and adapting to changing reporting requirements 

represented their top compliance issue. Over half of the respondents 

(55%) have yet to initiate a CRS program. 

 

 

compliance challenges. There will be a number of reporting standards 

and processes to follow that will differ from each other at a low level 

 

globalized reporting process, supported with the appropriate tools for 

local activity and backed by centralized oversight. 


Figure 9: CRS will be much broader and more complex than FATCA 

High 

Divers of complexity 

• Geographic footprint and number of reporting entities 

• Differences in local law: who, what, when, how 

Global impact and complexity 

• Volumes of reportable customers and transactions 

FATCA 

CRS 

By 2018, 90+ 

countries will have 

agreed to OECD’s 

recommendations 

Low 

2015 2016 2017 2018 and on 

FATCA and 

CDOT 

• FATCA reporting begins 

• FATCA reporting expands 

• CDOT begins 

• FATCA reporting 

continues 

• CDOT ceases 

• Ongoing annual FATCA 

reporting 

CRS 

• Jurisdictions releasing 

local CRS laws and 

guidance 

• Documentation 

requirements in effect 

• Reporting begins 

for early adopter 

jurisdictions 

• Reporting expands to 

additional jurisdictions 


18

Conclusion 

The threat of disruption is clear throughout the entire value 

chain of the global wealth and asset management industry. 

The client-facing advisor is under threat from the robo-advisor, 

or at least facing far more competition and benchmarking 

from this new platform. Asset servicers are threatened by 

blockchain technology, which may introduce decentralization, 

new nontraditional players and peer-to-peer processing into 

a highly concentrated business environment traditionally 

characterized by centralization, oligopolistic pricing power 

and huge barriers to entry (enormous economies of scale 

and global reach). Traditional fund distributors are under 

threat: in many markets, such as the EU, these distributors’ 

remuneration models will be restructured amid sweeping 

conduct-focused regulatory reform. 

While these potential disruptions may be new for wealth and 

asset management, disruption has been nothing new for most 

other sectors of the global economy. Rapid paradigm shifts 

driven by technology and regulatory overhaul have already 

occurred and abruptly altered the landscape for many other 

sectors, including retail, airlines, telecommunications and 

consumer electronics. 

What is unique for wealth and asset management is that the 

 

extinction. Technological revolution, price transparency, 

increased sophistication of clients and their growing demand 

for better service, and regulators keenly attuned and proactive 

 

megatrends that have already been disrupting most other 

 

compared with other sectors, been comfortably insulated in 

the past to many of these megatrends and disruptive threats. 

 

 

sectors to learn how to successfully adapt. Over the past 

decade, the consumer banking sector has addressed similar 

disruptive threats and increased competition by implementing 

more cost-saving technology, focusing more on the client 

experience, and adding more value and personalization to their 

service offerings wherever possible. 

Thoughtful planning, coordination with all stakeholders and 

long-term strategic insight will prove to be essential elements 

 

and opportunistically seize disruption as a chance to identify 

new ways to increase productivity, innovate to enhance client 

experience and creatively deliver more value in their service 

offerings will ultimately grow their business and emerge as 

winners in the changing market. 

19 

| The top 10 disruptive threats and opportunities in global wealth and asset management

The top 10 disruptive threats and opportunities in global wealth and asset management | 20

Contact 

Michael Lee 

EY Global Wealth & Asset 

Management Leader 

michael.lee@ey.com 

 

21 

| The top 10 disruptive threats and opportunities in global wealth and asset management

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The top 10 disruptive threats and opportunities in global wealth and asset management | 22

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How EY’s Global Wealth & Asset Management Sector can help 

your business 

The global wealth and asset management sector has rebounded from the 

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on efficiently adapting to change, managing complex risks and growth 

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Management Sector brings together a worldwide team of dedicated 

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help you meet your goals and compete more effectively. 

© 2016 EYGM Limited. 

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