The consolidation of the asset management industry is unstoppable. According to the latest edition of the report prepared by Morgan Stanley and Oliver Wyman, the number of asset managers will decline by 20% over the next five years. Additionally, global assets are projected to reach all-time highs of $200 trillion, representing an annual growth rate of around 8% and a cumulative increase of 48%.
These conclusions were reached after analyzing how the asset management business is evolving and how the industry consolidation process is progressing. “As players consolidate, internalize, and shift toward strategic partnerships, and wealth management clients raise their expectations and professionalize their relationships (for example, through the use of family offices and multi-family offices), growth opportunities are becoming scarcer and more concentrated. We expect the combination of these factors to drive consolidation, as mid-sized players become attractive acquisition targets for leaders seeking greater scale and diversification,” the report states.
According to the analysis in the report, the effects are already being felt: the number of transactions has entered a new normal of over 200 significant deals per year since 2022—double the rate of the previous decade—in both asset management and wealth management. “The asset management industry is no longer producing new fund or ETF managers: with an average of more than 150 over the past two decades, net annual additions of traditional asset managers have dropped to a handful in the past three years. Even the active private markets are showing a similar trend,” it notes as a key data point.
Consolidation Continues
The report estimates that by 2029, there will be over 1,500 significant transactions in asset and wealth management, resulting in up to 20% fewer asset managers with at least $1 billion in assets over the next five years. “Success in this new era of consolidation will require asset and wealth managers to consider mergers and acquisitions as a central lever in their growth strategies,” the report concludes in light of this trend.
When it comes to deal activity, mid-sized asset managers (with between $500 billion and $2 trillion in assets) are the most exposed. According to the report, they show lower profitability—with operating margins around 26%—compared to larger managers (around 44%) and smaller ones (around 36%). Their profitability has fallen by approximately 4 percentage points since 2019, while small and large firms have remained relatively stable. Furthermore, the report estimates that there will be between 30% and 40% fewer clients for asset managers, as clients consolidate, internalize more than they outsource, and seek to do more with less.
The Outcome of M&A Deals
Although most mergers in the asset management sector have historically struggled to deliver meaningful improvements in cost-to-income ratios, the report argues that “a new mergers and acquisitions strategy can generate value.” According to its analysis, approximately 40% of traditional managers managed to improve their cost-to-income ratios three years post-deal, with the greatest cost savings coming from support and control functions. The firms that succeeded were those that balanced aggressive cost-cutting with careful management of client attrition following the merger. Moreover, three years after the deal, one-fourth of merged firms significantly outperformed the market’s organic growth rates. “Successful firms focused on client and product complementarity rather than merely on generating cost synergies,” the document notes.
Another key finding is that half of the alternative investment firms acquired by traditional managers grew significantly faster than the market by leveraging—and improving—the traditional manager’s distribution scale. In this regard, the report concludes that further value is likely to be unlocked by incorporating alternative managers into pension funds in Europe and the United States.
Types of Transactions
These arguments are fueling sector consolidation, which, according to the report, is taking place through three types of transactions. It notes that bank-affiliated wealth managers involved in M&A activities improved their cost-to-income ratio (CIR) by 0.5 points between 2022 and 2024, while others saw their CIR increase by 2.3 points. “This is the result of a careful reprioritization of domestic accounting hubs and subsequent acquisitions and divestitures,” the report explains.
It also expects more banks to expand into non-bank wealth management channels (independent managers and digital distribution).
In the consolidation of independent wealth managers (RIAs, IFAs, etc.), multiple arbitrage has historically driven most of the value creation, followed by cost synergies. However, attention is now shifting toward capturing revenue synergies driven by enhanced tools and increased investment in data and analytics. The report identifies that the next frontier for independent managers focused on UHNW clients (with $30 million or more in investable assets) is international expansion.
“Looking ahead, we expect most of the activity to come from cross-sector deals with insurance companies and asset managers that reassess whether they are the right owners of their asset management businesses and consider the possibility of pursuing mergers and acquisitions,” the report states among its main conclusions.
This report, based on Oliver Wyman’s extensive project experience and more than 30 conversations with senior executives from asset and wealth managers collectively overseeing over $55 trillion in assets, delves into the drivers of consolidation, the different types of strategic moves and their rationale, the history of past deals and combinations, as well as our outlook for the next five years and a playbook for executing successful transactions.
