UK asset and wealth managers cautiously optimistic but costs continue to rise: CBI/PwC Financial Services Survey

UK asset and wealth managers returned to optimism in the first quarter of 2017, following a period of intense pessimism throughout 2016 according to the latest CBI/PwC Financial Services Survey.

Business volumes grew in the three months to March but this growth is expected to slow over the coming quarter. However, spreads and average fees and commissions are expected to rise, with profitability continuing to improve strongly.

Mark Pugh, UK asset and wealth management leader at PwC, commented:

“The industry has picked itself up and feels in a stronger position than it did six months ago. Nonetheless, the sector remains sensitive to uncertainty and potential market volatility.”

Rising costs, technology spend and regulatory hurdles

Total operating costs rose sharply in the first quarter and are expected to continue at the same pace in the coming three months. Despite this, asset and wealth managers continue to invest in technology, albeit at a slightly dampened pace this coming quarter.

Regulation and legislation is cited as the main constraint on business expansion for asset and wealth managers in the year ahead.

Mark Pugh, UK asset and wealth management leader at PwC, continued:

“A slight reduction in the pace of technology spend could represent asset and wealth managers delaying large scale investment until they have more certainty on upcoming regulation such as MiFID II, PRIIPS and the FCA Market Study.

“Firms know they have a lot of work to do to update legacy systems, but they are understandably thinking long-term and want to ensure they have all bases covered when implementing large scale technology platforms. As a result, investment in technology will continue and we expect it to accelerate when clarity on regulation emerges.”

Consolidation & competition

Respondents continue to see M&A playing a part in their growth strategies in the coming year, alongside organic growth strategies aimed at retaining existing customers.

Mark Pugh, UK asset and wealth management leader at PwC, concluded:

“Scale and the ability to implement innovation quickly is driving consolidation in the sector, and we expect this to continue.  Anticipation of future consolidation seems to be a factor in the industry’s swing back towards optimism.”

Ends.

Notes for editors.

1. Mark Pugh is available for interview. Please contact Ellie Raven on [email protected] or +44 (0) 207 804 3663.