Race for Relevance Fuels M&A in Asset and Wealth Management

Oct 8, 2025

The most fragmented sector of financial services is likely to see the number of firms fall by 20% over the next five years.

Key Takeaways

  • Consolidation among asset and wealth managers could result in more than 1,500 deals in the industry by 2029.
  • Since 2022, the industry has averaged more than 200 M&A deals annually—double the previous decade’s average.
  • Leaders in the industry are targeting mid-sized asset and wealth management firms to gain scale and diversify their portfolios of services.
  • Insurers are reevaluating their investment management capabilities, which is key driver for consolidation.

The asset and wealth management industry is undergoing a transformative shift, with consolidation emerging as a critical driver of success. The subsector, which historically has been one of the most fragmented in financial services, now faces mounting pressures that are reshaping its landscape.

 

In the past, firms could thrive with lean teams and a handful of clients. Today, however, several factors are forcing firms to evolve:

 

  • declining margins;
  • rising demand for technology and AI investment; and
  • intensifying competition for capital.

 

Clients are also seeking more professional relationships, while growth opportunities are becoming increasingly scarce.

 

“We expect the combination of these factors to drive M&A in the industry,” said Betsy Graseck, Morgan Stanley’s Global Head of Banks and Diversified Finance Research. “Mid-sized players are becoming attractive acquisition targets for leaders seeking further scale and diversification.”

 

A joint report from Morgan Stanley and Oliver Wyman forecasts more than 1,500 significant mergers and acquisitions by 2029 among firms managing at least $1 billion in assets. This wave of activity could reduce the total number of firms by up to 20%.

 

The State of the Industry

Global assets under management (AUM) in the industry reached a record $135 trillion in 2024, driven by market performance and organic growth, with projections reaching $200 trillion by 2029. But several notable headwinds are contributing to likely consolidation.

 

In asset management, large players in private markets are capturing the bulk of new capital flows and commanding premium fees, while smaller managers are grappling with fundraising challenges and downward pressure on fees.

 

Meanwhile, wealth managers seemed to be positioned to benefit from nearly 6% growth in household financial wealth approaching $400 trillion by 2029. But wealth managers across the industry are struggling with eroding revenue margins, which declined by 6 basis points in 2024 and a further 3 basis points in the first half of 2025 and likely to see continued pressure ahead.

 

Leading asset and wealth managers are focused on winning in the high net worth segment, scaling in private markets, creating an organic growth machine and building a durable cost base.

 

Deals Are Accelerating

Against this backdrop, consolidation is already underway. Since 2022, the industry has averaged more than 200 M&A deals annually—double the previous decade’s average.

 

Investors can expect three primary categories of M&A activity for asset and wealth managers looking to achieve cost synergies, expand their client base, add new capabilities and gain more access to capital:

 

  1. Intra-sector deals: Asset managers and wealth managers acquiring peers, currently the most common type.
  2. Inter-sector deals: Transactions between asset managers and wealth managers aimed at expanding service offerings.
  3. Financial sponsor deals: Investments by financial sponsors in asset or wealth management firms.

 

“Going forward, we expect inter-sector deals to grab the biggest headlines, with insurance companies and wealth managers reassessing whether they are the right owners of their asset management businesses,” says Graseck, the lead author of the study, which included more than 30 discussions with senior executives at firms that collectively manage more than $55 trillion in assets.

 

Graseck emphasizes that successful acquirers will need a disciplined approach: “They will need to identify the right acquisition, reduce risks, execute decisively to fend off competition and run a flawless post-merger integration to materialize ambitious return targets.”

 

Should Insurers Keep Their Asset Management Units?

Insurance companies are playing a pivotal role in the M&A surge. Nearly all insurers have some internal investment capabilities to support their general accounts. However, smaller and mid-sized insurers are reconsidering that model.

 

Some have concluded that the best course of action is to outsource part or all their investment management capabilities. Others are pursuing acquisitions to boost competitiveness.

 

“This dynamic has created a tremendous amount of M&A and restructuring activity between asset managers, particularly alternative managers focused on private credit, and insurers,” Graseck added.