Asset manager profit margins under pressure as infrastructure costs climb

Profit margins at asset management firms have eroded significantly over the past eight years, and a new global study from PwC warns the trend shows no sign of reversing without a fundamental rethink of how firms manage their operational infrastructure.

The report, Asset Management Infrastructure: Rethinking the Industry's Piping by PwC, draws on a survey of 150 asset managers and 50 infrastructure providers worldwide. It finds that profit per assets under management has declined 19% since 2018 and is projected to fall a further 9.1% by 2030, according to PwC's Global AWM & ESG Research Centre. At the same time, the bill for the systems that keep firms running keeps rising.

"The industry's profits per dollar managed have fallen by almost a fifth, and the bill for the pipes keeps rising," said Roland Kastoun, Global Asset and Wealth Management Advisory Leader at PwC. "The managers who survive the next five years won't be the ones with the flashiest AI, but rather the ones who fixed the so-called boring stuff first."

Legacy systems consuming the technology budget

A central finding of the research is that most firms are spending the bulk of their technology investment on maintenance rather than modernization.

 Only 23% of asset managers direct most of their technology budget toward building new capabilities. By contrast, 29% allocate more than 70% of their technology spending to maintaining legacy systems - a pattern that has direct consequences for AI readiness.

Some 24% of respondents cite data fragmentation and poor data quality as the single biggest barrier to scaling AI, while 17% point to legacy infrastructure. Yet 67% simultaneously identify AI and machine learning as a top technology investment priority over the next three years - a tension that underscores how outdated infrastructure is limiting returns on that ambition.

A separate Mercer survey of 131 asset managers, conducted in early 2026, found that while 55% of firms report AI is integrated into at least one investment process, barriers to deeper adoption remain significant. The PwC findings suggest much of that friction originates in the data and systems layer beneath the AI itself.

Firms are also struggling with a spending paradox that InvestmentNews has covered in the context of how asset managers are navigating the AI adoption curve: investment is rising, but the returns depend on foundations that haven't been updated.

Market data costs frustrating asset managers

On the cost side, market data emerged as a particular pain point. Some 58% of asset managers in the PwC survey rank market data among the most strategically expensive infrastructure layers relative to the value it delivers. Regulatory and reporting systems were cited by 47%, and core technology platforms by 46%.

Fee compression is compounding the problem. According to the PwC report, 67% of asset managers say fee pressure is limiting their ability to invest in new infrastructure, creating a cycle in which the very pressures that demand modernization also constrain the resources available to fund it.

A Boston Consulting Group report from April 2026, as referenced by InvestmentNews, noted that industry margins have remained around 30% for years, with rising technology costs and ongoing fee pressure offsetting the benefits of scale. The PwC data suggest the trajectory is now worsening rather than stabilizing.

For independent advisors and wealth management firms, the implications extend beyond the largest asset managers. As AI reshapes decision-making across wealth management, the platforms and products advisors rely on are increasingly built and maintained by firms operating under exactly the cost pressures the PwC report identifies.

Infrastructure strategy becomes competitive strategy

The report outlines four models that asset managers are gravitating toward as they reorganize their operations: infrastructure orchestrators, which own core regulated systems; specialist modular providers, which compete on specific domain expertise; digital and tokenization platforms, which own the connectivity layer; and integrated asset managers, which commercialize platforms they originally built for internal use.

Among survey respondents, 29% say they aim to compete as specialist modular providers by 2030, and 24% aspire to operate as digital and tokenization platforms. No single model dominates.

PwC's data show 44% of firms already favor hybrid sourcing - combining in-house, purchased and partnered capabilities - while 21% prefer to buy and 18% to partner, with just 13% committed to building entirely in-house.

Seventy percent of infrastructure providers expect to take a larger share of industry revenues over the next five years, a finding that Björn Ebert, Financial Services Leader at PwC Luxembourg, described as a signal of where industry leverage is shifting. "Seven in ten infrastructure providers expect to take a bigger slice of the pie, which tells you where the power in this industry is quietly shifting," Ebert said.

The threat from outside the traditional financial infrastructure ecosystem is also sharpening. Some 68% of infrastructure providers named hyperscale cloud providers as the primary emerging competitive threat, ahead of AI-native data platforms at 54%.

The decisions that can't be deferred

The report does not present the current moment as a gradual transition. PwC's analysis frames infrastructure decisions as choices that now determine competitive position through 2030 - not just operational efficiency. Firms that defer those choices, the report argues, risk locking in cost structures that compress margins faster than the broader industry trend already does.

That urgency is consistent with how asset managers are being pushed to rethink their playbooks across distribution, product and technology, according to research published by InvestmentNews earlier this year.