An M&A Boom for Financials

Summary

Podcast Summary: Thoughts on the Market

Episode: An M&A Boom for Financials

Date: October 13, 2025
Hosts: Betsy Grasic (US Large Cap Banks Analyst & Global Head of Banks and Diversified Finance Research), Mike Cypress (Head of US Brokers, Asset Managers and Exchanges Research)

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Episode Overview

This episode focuses on the growing trend of mergers and acquisitions (M&A) in the asset management and wealth management sectors. Betsy Grasic and Mike Cypress explore what is fueling the race for scale, how deal activity is shaping up, and the key implications for investors and industry players as firms seek to consolidate for greater competitiveness and efficiency.

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Key Discussion Points & Insights

1. Industry Growth Outlooks

• Asset Management

  • Industry size: ~$135 trillion in assets under management (AUM) managed for a fee.
  • Growth Forecast: 8% annual growth over the next five years.
  • Drivers:
    • Private markets: Rapid rise anticipated as both institutional and retail investors allocate more to this asset class (“democratization of private markets”).
    • Solutions-based products: Addressing demographic challenges (e.g., aging populations) by offering products like retirement income solutions, tax-efficient strategies, model portfolios, and outsourced CIO mandates.
    • Notable quote:

      "We expect this democratization of private markets to play out and we see that being helped by product innovation, investor education and technology advances." — Mike Cypress [01:11]

• Wealth Management

  • Industry size: $301 trillion globally, expected to reach $393 trillion by 2029.
  • Growth Forecast: 5.5% compound annual growth rate (CAGR), slower but starting from a larger base compared to asset management.
  • Key Opportunities: Expansion in ultra-high-net-worth and affluent client segments and increased efficiencies from technology.
  • Insight: Both asset and wealth management have been highly fragmented due to lower capital needs compared to other financial sectors.

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2. Drivers of M&A in Asset Management

• Scarcity of Growth:

  • Clients are working with fewer asset managers, reducing the number of available “slots” for these relationships by up to a third in coming years.

    “Growth is becoming a bit more scarce with clients working with fewer partners...over the next five years we expect the number of available slots to continue to decline upwards of a third.” — Mike Cypress [03:48]

• Consolidation of Providers:

  • “Winners” (the largest firms) are capturing more new assets, leveraging scale to reinvest in capabilities and relationships.
  • Concentration is pushing mid-size firms ($0.5–2 trillion AUM) to pursue deals for scale and cost efficiency.

• Stressors:

  • Rising business costs (including AI investments), evolving client needs, and profit pressure are driving consolidation, especially for mid-sized managers.

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3. Types & Trends in M&A Activity

• Partnership Models:
  • Increasing experimentation with joint ventures and alliances, e.g., private market managers accessing retail channels without building full infrastructure.
• Deal Types:
  • Intra-sector: Acquisitions within the same sector (e.g., asset manager buying another asset manager for scale or distribution).
  • Inter-sector: Deals crossing sectors (e.g., asset management merging with wealth management or insurance to own more of the value chain).
  • Financial sponsor deals: Private equity or other sponsors investing in asset or wealth managers.
  • Notable quote:

    “Experimentation around partnership will only accelerate...It allows private market managers to access retail distribution without owning the end infrastructure.” — Mike Cypress [05:50]

• Outcomes:
  • Historically mixed successes, but expectations are that industry players will adapt to make future M&As more effective—especially if they address cultural and integration challenges.

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4. Wealth Management Consolidation Drivers

• Succession Planning:
  • Aging population of advisors is driving M&A as firms manage transitions and maintain client service.
• Need for Scale:
  • Increased costs (IT, AI, cyber risk management) force smaller players to seek partners or buyers.
• Capital Deployment:
  • Large banks with excess capital are expected to increasingly pursue wealth management acquisitions, motivated by the industry’s high return on equity and strong market valuations.
  • Notable quote:

    “Wealth management is one of the best, if not the best, financial institution service for shareholders. It is a high ROE business...commands a high multiple in the stock market.” — Betsy Grasic [08:36]

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Notable Quotes & Memorable Moments

• On Industry Fragmentation:

  "Both asset management and wealth industries have been very fragmented for a very long time...they need less capital to operate successfully." — Betsy Grasic [02:55]

• On Candidates for M&A:

  “…particularly a challenge for those mid sized money managers...half a trillion to 2 trillion in size, making them more likely to pursue consolidation opportunities.” — Mike Cypress [05:20]

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Important Timestamps

• 00:01 – Introductions and episode setup
• 00:45 – Asset management industry outlook
• 02:15 – Wealth management industry outlook
• 03:48 – Discussion of increased M&A drivers
• 05:45 – Types of deals emerging in the new M&A cycle
• 07:35 – Specific drivers of consolidation in wealth management
• 08:36 – Why banks are attracted to wealth management M&A
• 09:07 – Episode wrap-up

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Episode Tone & Energy

The conversation is analytical, data-driven, and forward-looking, with an emphasis on the strategic rationale behind industry consolidation. The hosts maintain a professional, insightful, and approachable tone, making complex market trends accessible for investors and industry watchers.

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Summary prepared for listeners who want a deep dive into current M&A trends in financials without needing to hear the full episode.

Transcript

[A]

Welcome to Thoughts on the Market. I'm Betsy Grasic, Morgan Stanley's US Large Cap Banks Analyst and global head of banks and diversified finance Research.

[B]

And I'm Mike Cypress, head of US Brokers, Asset Managers and Exchanges Research.

[A]

The asset management and wealth management industries are on the cusp of major consolidation. We're going to unpack today what's driving the race for scale and and what it means for investors and the industries at large. It's Monday, October 13th at 4pm in New York. Mike, before we dive into the setup for M and A, I did want to get out here on the table. What's your outlook for the asset management industry?

[B]

Sure. So asset management today is, call it $135 trillion industry in terms of assets under management that are managed for a fee. We expect it to grow at about an 8% clip annually over the next five years. And that's driven by faster growth in private markets, solutions and passive strategies. While we expect to see slower growth in the core active arena, two key drivers of growth there. First, private markets. We expect to see rising investor allocations from both institutional investors, but also more importantly from retail investors that remain early days in accessing the asset class. So as we look out in the coming years, we do expect this democratization of private markets to play out and we see that being helped by product innovation, investor education and technology advances that are all helping unlock access. Second growth driver is solutions. And I think you're looking at me a little dazed on what solutions. And by that we really mean products and strategies that are addressing demographic challenges around aging populations. So think about that as solutions that provide for retirement income as well as those that offer tax efficient solutions. So think about that as model portfolios as well as sub advisory mandates. We also expect to see growth in outsourced chief investment officer or OCIO mandates and broadly retirement focused products. So that's the asset management industry in terms of our outlook. Betsy, what's your outlook for the growth in the wealth management industry?

[A]

Well, somewhat similar, but a little bit slower off of a larger base. What does that mean? So we are looking for growth, global growth in wealth management of 5.5% CAGR. And that is off of a base of 301 trillion, which is intriguing, right, because that's larger than the 135 trillion you mentioned for asset management. So in wealth we were expecting 301 trillion in 2024 grows to 393 trillion in 2029. And within the wealth industry, what we see as the driver for incremental opportunities here is both in the ultra high net worth segment as well as the affluent segments as client needs evolve and technology delivers improving efficiencies. And I think one of the interesting things here as we think about the look forward from an industry perspective is the fact that both asset management and wealth industries have been very fragmented for a very long time, especially relative to other financial industries. I think one reason is that they need less capital to operate successfully. But Mike, back to the asset management industry specifically, deal activity seems to be inching up. What are you attributing this increase in M and A to?

[B]

Yeah, so we do see M and A picking up and we expect that to continue over the next couple of years. A number of reasons for that. First, growth is becoming a bit more scarce with clients working with fewer partners. And over the next five years we expect the number of available slots to continue to decline upwards of a third, which concentrates growth opportunities.

[A]

Wait, wait, wait. Upwards of a third. And number of slots. When you say number of slots, you're talking about it from the asset manager client perspective.

[B]

Correct. From the asset owner standpoint or intermediary.

[A]

Standpoint, they're looking to consolidate their providers.

[B]

Correct.

[A]

Okay.

[B]

They're looking to work with fewer asset managers. At the same time, the winners are taking more share. Right. So our work shows that the largest firms are disproportionately capturing a larger share of net new money as they leverage their scale to reinvest in capabilities as well as in relationships. And also I'd point to the fact that we have seen a pickup in deal activity already and we think that's going to lead more firms to consider strategic activity themselves as they think and rethink what constitutes scale. And we think that that bar is rising and firms are thinking about how to compete effectively as the landscape evolves. And look, this is all in the context of already a lot of challenges and changes happening as you think about evolving client needs, the rising cost of doing business, whether it's investing for growth or even harnessing AI. And that's all pressuring profitability. We think this is particularly a challenge for those mid sized money managers that are multi asset, multi liquid and global. Those with call it half a trillion to 2 trillion in size, making them more likely to pursue consolidation opportunities to bolster their capabilities and scale while also generating cost efficiencies.

[A]

So now looking forward, what type of deals do you expect and how does it differ from past years?

[B]

Sure. So a few things are different than past years. First is that the deal activity is encompassing Many forms of partnership. And we think that this experimentation around partnership will only accelerate. That allows for example, for private market managers to access retail distribution without owning the end infrastructure and and the last mile to the customer. It also allows traditional managers to provide their retail customers with access to high quality private market strategies from well known and branded firms. Second is we see a broadening out of the types of acquisitions themselves when we talk about M and A. Right. So three types of deals. First are deals within the same vertical or intra sector. So think about this as an asset manager buying another asset manager to acquire capabilities to gain cost synergies or bolster distribution. Second type of deals that we're seeing are ones that expand beyond one's own vertical inter sector deals. Asset management combining with wealth or insurance, for example, where firms would seek to own a larger greater portion of the overall value chain. These firms are getting closer to that end client, for example, an asset manager getting closer to that end customer. The third type being financial sponsor deals or a sponsor is investing either as in an asset or a wealth manager. Now you didn't ask me around the historical outcomes of M and A, but I would say that the historical outcomes have been mixed in the asset management space. But here we think that the opportunity ahead is so great that we think firms will find ways to navigate and pursue strategic activity. But it does require addressing some of the culture and integration challenges that have plagued some of the deals in the past. Okay, so Betsy, what do you see as the key drivers of consolidation in wealth management?

[A]

There's several from the wealth manager side. Number one is an aging population of advisor and advisor owners and the need to address succession and how to best serve their clients when passing on their book of business. So we've got succession issues as the number one driver. But additionally, the need for scale is clearly getting higher and higher given the costs of IT infrastructure rising, the needs to be able to leverage AI effectively and to manage your cyber risk effectively. These are just some of the drivers of desire to merge from the wealth manager perspective. Second, we have an increasing buying pool. If you just look at the large cap banks, for example, significant amount of excess capital, could we see some of that excess capital be put to work in the wealth management industry? To me, that would make sense.

[B]

Why?

[A]

Because wealth management is one of the best, if not the best, financial institution service for shareholders. It is a high ROE business. It also is a business that commands a high multiple in the stock market. So we would not be surprised to see activity there over the course of the next several years. So Mike, thanks for joining me on the show today.

[B]

Thanks Betsy.

[A]

Always a pleasure and to our listeners, thanks for listening. If you enjoy thoughts on the market, please leave us a a review wherever you listen and share the podcast with a friend or colleague today.

[C]

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