Asset management 2025: Growth, challenges, and key opportunities

• Below is an overview of how the asset management industry is evolving, including its opportunities and challenges.
• This information is primarily aimed at asset managers seeking to understand current industry behavior to make better decisions.
• FlexFunds offers a securitization program designed to support the growth of asset management. For more information, feel free to contact our experts (contact form).

The asset management industry is undergoing a profound transformation, driven mainly by the widespread adoption of passive funds and the integration of new technologies.

Many of the trends now shaping the industry had already been underway for several years, but since 2022, the pace of change has accelerated. As a result, asset management firms must adapt or risk falling behind.

The current landscape of the asset management industry

Today, the global asset management industry is undergoing dramatic changes. Profitability is being impacted by the growth of passive funds, while defined benefit pension plans are adjusting risk in response to demographic aging.

Additionally, the investor base is shifting toward a new generation with digital skills and demands that differ greatly from those of their predecessors. At the same time, technology continues to evolve at a rapid pace.

Global trends and growth drivers

One of the main trends in the sector is artificial intelligence (AI), which promises to transform operational models in the financial industry.

41% of organizations are currently in the implementation phase of AI-based solutions, while only 26% have actively begun exploring general AI, according to a Citi report.

Still, most professionals in the industry agree that these technologies will redefine investment processes. However, some obstacles remain, such as reliance on legacy systems and concerns around data quality, security, and transparency.

On the other hand, the most promising business models in asset management will be those capable of blending the best of traditional approaches with the advantages of new technologies.

The focus will be on client experience, through initiatives such as:

• Hyper-personalized portfolios powered by technological tools.
• Performance-based fee structures and investment solutions tied to concrete outcomes.

The U.S. bank revealed that 67% of respondents identified democratizing access to private markets as a key element for future business models.

Additionally, 56% emphasized the importance of offering a variety of investment strategies directly at the point of sale, while 49% highlighted the value of building direct connections with consumers via accessible, intermediary-free channels.

Challenges for asset managers 

It is important to note that asset managers are not exempt from challenges.

They are likely noticing that investor demands are becoming increasingly complex. Institutional investors are focused on achieving a mix of capital preservation, high returns, and strong performance in environmental, social, and governance (ESG) funds.

Meanwhile, retail demand for tailored solutions and diversified investments will also rise, along with a need for more advice and education.

As a result, asset managers will be compelled to accelerate diversification, using alternatives to boost returns while also making greater use of low-cost options such as factor investing and enhanced beta strategies.

Firms will also face growing margin compression. Competition and regulation will erode fees across all asset classes, and the shift to lower-margin strategies will further reduce revenues.

Additionally, economic and demographic factors will shrink net profits from historic levels of 3–4% to around 2% annually. Meanwhile, the need to invest in new products and technology will increase spending.

Strategies to overcome challenges and thrive

Asset managers will need to make significant changes to their strategies and business models if they want to succeed in an increasingly fluid and challenging environment.

Asset management firms will have to pursue multiple growth paths. That includes investing in data analytics and technology, adopting a flexible approach to partnerships, and increasing mergers.

There will also be opportunities for firms to offset declining profits by taking action on strategic cost transformation.

Asset managers will not only need to transform their medium-term performance but must also use the current disruption as a springboard for long-term success.

They must actively prepare for the end of today’s industry paradigms, considering radical yet plausible scenarios, identifying their strategic implications, and beginning to plan accordingly.

The future of wealth management: Projections and emerging trends

Within this context, a study by Boston Consulting Group (BCG) revealed that global assets under management (AUM) reached a record USD 128 trillion in 2024 — a 12% increase compared to the previous year.

The firm highlighted that over 70% of the asset management industry’s revenue growth during the period came from market performance, not from net new investor inflows.

At the same time, continued pressure on fees, changing investor preferences, and the advance of digital disruption are pushing firms to rethink their business models, accelerate operational efficiency, and sharpen the focus of their strategies.

Looking ahead, Dean Frankle, Managing Director and Partner at BCG, stated: “The winners of the next decade will not be those who simply weather the storm, but those who redefine their future direction.”

“Recent market volatility could serve as a catalyst for change, and asset managers will need to shift from recovery mode to innovation mode—rethinking how they deliver value, engage clients, and run their businesses,” he added.

Within this framework, FlexFunds — through its asset securitization program — provides asset management professionals with tools that can significantly reduce administrative burdens, simplify the distribution of investment strategies, and ease access to investors in global capital markets.

To learn more about FlexFunds’ solutions and our asset securitization program, feel free to contact our team of specialists (contact form). We’ll be glad to assist you!

Sources:

• https://www.citigroup.com/global/insights/rebooting-global-asset-management-industry
• https://www.bcg.com/press/29april2025-global-asset-management-record-high-critical-turning-point