Institutions to wrestle for $25 billion in fees
Financial services institutions will battle it out for a share of $25 billion in annual fees by early next decade according to the latest bi-annual Market Projections Report from research houseDexx&r.
The estimates are based on the group’s claim the Australian funds management industry is set to grow from $650 billion to $1.5 trillion over the next 10 years and the assumption average fees will remain at around 2 per cent of assets per annum.
The lion’s share of this fee income is likely to go to the four big banks, which through their wealth management arms account for 44 per cent of the market according toDexx&rmanaging director Mark Kachor.
Meanwhile the forecast to June 2013 notes the growth of the industry’s funds under management is back on track following the recovery of equity markets after the negative returns experienced during 2002.
“The growth is fuelled by continued increases in the superannuation market and as a result of the ageing of the baby boomer cohort continuing to invest in retirement income products,” Kachor says.
“An increasing amount of super funds will roll into retirement income products, particularly allocated pensions, which we forecast will grow to $127 billion over the 10 years,” he adds.
The market is set to grow at a compound rate of more than 8 per cent, according to Dexx&r, and the retirement products segment at more than 13.6 per cent annually to total $163 billion in 2013. The retirement incomes sector will increase from 5.9 per cent to 8.7 per cent of the total market.
According to Kachor, ageing baby boomers will drive the growth with those aged over 60 increasing from 17.4 per cent of the total population today 25.1 per cent or 5.9 million people in 2013.
Employer sponsored superannuation master trusts are also predicted to enjoy strong growth increasing from $43.6 billion to more than $214 billion in 2013.
Not-for-profit industry funds are also predicted to grow at a faster rate than the total market, increasing from 7.2 per cent to 10.3 per cent, while personal superannuation is also predicted to grow strongly jumping from $90.7 billion to $272 billion - an annualised growth rate of 11.6 per cent.
In this segment the four largest retail banks along with AMP are even more dominant with a combined market share of more than 63 per cent of the total market.
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